Weekly review: when numbers don’t lie

Weekly review: when numbers don’t lie

 

By Daniel Stroe – Bucharest

This past week’s attention turned to statistics, hidden by Romanian officials but disclosed by EU officials, showing the Romanian economy contracting, despite a positive and optimistic prognosis on the part of the Romanian Government who failed to read the signs of economic instability. Things worsen when we find out it is the second consecutive trimester with economic decrease which means Romania is in technical recession.

Romania’s economy went up by 1.4 per cent in the second trimester compared to the same period last year, over the average 1.2 growth registered in the EU, but had an abrupt decrease compared to this year’s first trimester, the most significant among all the communitarian countries, EUROSTAT has announced.

The economy has decreased by 1 per cent in the second trimester compared to the performance registered in the first three months, a conclusion which has caught many by surprise. At the same time, in the first trimester of 2014 Romania’s economy contracted by 0.2 per cent compared to the previous three months. With two consecutive trimesters marked by economic decline, Romania basically entered technical recession, Eurostat warned.

Romania’s National Institute of Statistics had previously said the country registered a 0.1 per cent economic growth in the first trimester compared to last one of 2013, but statistics have been reviewed in the meantime showing the contraction. But INS never publicly revealed the new numbers.

Despite some news highlighting Romania’s economic advance in 2013, the whole attention stuck to the bad news and hence a debate on why the Government failed to make the negative numbers public. In comparison, Romania’s neighbors, Hungary and Bulgaria had an economic growth of 0.8 % and, respectively, 0.5 % in the second trimester. Overall, EU registered an economic growth of 0.2 % in the second trimester compared to the first three months.

Both politicians and analysts were caught unawares by these figures released by EUROSTAT and confirmed by the National Institute of Statistics. The opposition asked PM Victor Ponta to explain the downturn and why in the official speech the government relied on a 3.5 % growth. They explain the sudden downturn of the national economy by a series of taxes introduced by the social-democrat government, such as fuel tax which backfired and the tex on special constructions, below the target taxt collection, poor performance in attracting EU funds and decrease of foreign investments. In the first half od 2014, foreign investments fell by 10 per cent compared to the same period of last year.

In his turn, a keen observer of the country’s economic downturn, President Traian Basescu warned PM Victor Ponta’s economic policies risk turning Romania back into recession and leading to a suspension of agreements with IMF.

Basescu didn’t spare any words to criticize whom he said is a prime-minister who doesn’t understand economics. He also put the numbers down to the many taxes imposed on population and companies, especially the fuel tax and one on special constructions. Ponta had come up with these taxes as altrnatives to poor taxes collection. The President also blamed the current economic situation on lack of solid projects to attract EU funds. „I am warning the Romanians not to let themselves fooled or else they will pay the price of naivity next year”Basescu concluded, while warning Ponta not to resort to populist measures before the presidential elections this fall in which the PM is a front-runner.

Ponta has not been able so far to prove he can handle the country’s economy in a credible manner and this may cost him politically on the long run. His lack of understanding economical ralities was proved when Basescu summoned both him and his Finance minister to explain what financial alternatives the government has for the cut back of social insurance contributions which is assessed to leave an almost one billion Euros gap in the state budget every year. They both kept mum before the President, unable to explain sources to cover that hole. Ponta also attempted to juggle with the foreign policy, with speeches hailing China and Russia while failing to prove credibility in relation to EU and USA. A return to recession and, again, austerity measures may strike at the roots of his political ambitions, whether he wins the presidential poll this year or not.