Romania, the story of the gifted but unlucky kid?

One thing that I need to write about in more detail is how two people can interpret the same data differently. But not today.
Romania is not different than any other emerging economy. We pride ourselves to be better than the others and it is the world who is not recognizing our merits. A closer look will show that we exhibit the same reluctance to reform, bloated government sector, corrupt politicians, natural or state supported monopolies, high inflation and complicated fiscal system as most emerging and underdeveloped economies. More on the decisions from local policymakers soon.
Today I will show you some recent news on Romania and data without interpreting them, yet.
For example here are the latest press releases regarding developments in the real economy:
02.09.2011 Constructii de locuinte
În trimestrul II 2011 au fost date în folosinţă 10181 locuinţe, în scădere cu 508 locuinţe, faţă de trimestrul II 2010.(Second quarter less homes were built relative to 2010)

02.09.2011 Indicele preturilor productiei industriale
În luna iulie 2011, preţurile producţiei industriale pe total (piaţa internă şi piaţa externă) au înregistrat o creştere cu 1,0% comparativ cu luna precedentă şi o creştere cu 9,3% faţă de luna corespunzătoare din anul 2010. (PPI has increased 9.3% relative to 2010.)

02.09.2011 Indicii trimestriali ai costului fortei de munca
În trimestrul II 2011, costul orar al forţei de muncă în formă ajustată (după numărul zilelor lucrătoare) a înregistrat o rată de creştere de 4,20% faţă de trimestrul precedent şi de 2,46% faţă de acelaşi trimestru al anului anterior. (Hourly labor costs have increased reltive to 2010)

02.09.2011 Investitii în economia nationala
În trimestrul II 2011, investiţiile realizate în economia naţională au scăzut cu 8,6% faţă de trimestrul II 2010. (Investment fell relative to 2010)

31.08.2011 Somajul BIM în luna iulie 2011
În luna iulie 2011, rata şomajului BIM în formă ajustată sezonier a fost estimată la 7,3%, la acelaşi nivel cu cea înregistrată în luna anterioară şi cu 0,1 p.p. peste nivelul lunii iulie 2010. (Unemployment increased realtive to 2010)

29.08.2011 Autorizatii de construire eliberate pentru cladiri
În luna iulie 2011, s-au eliberat 3884 autorizaţii de construire pentru clădiri rezidenţiale, în scădere cu 6,7% faţă de luna iunie 2011 şi cu 9,0% faţă de luna iulie 2010. (Building permit fell relative to 2010)

Add to this higher borrowing costs from the local market for Ministry of Finance and the statement from the Minister that “I am not sure if we have the money to finance our expenditures for the next 4 months“.
Where do you think the Romanian economy is heading: heating or subzero?

2 thoughts on “Romania, the story of the gifted but unlucky kid?

  1. It’s actualy something of common sense. Unemployment has not increased mainly because the summer brought a spike in temporary demand in the tourist industry. Elsewhere companies have continued to lay off workers and stopped hiring new ones. The unemployment rate (BIM) will most likely deteriorate after the warm season is over.
    The rest of the indicators show that the adjustment has not fully taken place yet.
    The housing industry will most likely continue to fall, but at a more slow rate, with a stabilising tendency in Bucharest, while in the rest of the country, prices will continue to go down.

    The rising labour costs also show that instead of hiring people, managers prefer to add a bit more to the salaries of current workers (close to inflation rate).

    Without some stimulus the growth will continue to be export driven, at a slow pace. If storm breaks in the EU, the fragile growth forecasted for 2011 – 2012 will vanish in to thin air.

    1. I do agree mostly with what you are saying . Still, I am not sure about the reasons managers would decide to increase salaries for current workers. Are they working them more? I do not think so, the economy is not producing more. Also, as there are idle resources in the economy, especially labor, it does not make sense to overpay the ones you employ unless they are more productive. I think the increase in labor costs might be related to other employee costs in the company and not directly to salary. Nevertheless, this is not good news for inflation.
      On the stimulus I am preparing a piece for the next few days. The question is, should there be a fiscal or monetary stimulus? Or both?

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