Farewell to the recession in spring

Romanian economy is likely to contract by 7.7% in 2009, following to nudge back into positive territory in second quarter next year to 1% above Q1 2010 level, according to the forecasts of the National Prognosis Commission in its fall report.

Recovery in second quarter 2010

The Commission predicts the country is likely to come out of recession in the three months to June 2010, after seven successive quarters of decline. For next year, CNP expects GDP to grow 0.5%, in 2011 by 2.4%, in 2012 by 3.7%, in 2013 by 4.4% and in 2014 by 5.2%, the preliminary medium-term prognosis report shows.

The institution also said the economy would bounce back in third quarter 2010 with a GDP growth of 0.8% YoY.

GDP likely to shrink 8.5% in Q3 YoY

In third quarter this year the Gross Domestic Product is likely to drop 1% QoQ and 8.5% YoY, CNP says. In the fourth quarter 2009, the institution expects the GDP to stand 0.8% below quarter-ago level and at 7% below year-ago level.

The economy is likely to nosedive further into 2010, with 0.2% decline in Q1 compared to previous quarter and 3.5% compared to first quarter 2009. The following three months will mark the exit from the recession, even though the Gross Domestic Product will remain on the negative side compared to second quarter 2009, at 1.2% below.

685,000 jobless by year-end

The number of jobless is expected to climb to 685,000 by year-end, up 70% from December 2008, National Prognosis Commission predicts.

The latest data provided by the national labor agency (ANOFM) show the number of people living on welfare reached 601,673 at the end of August, as compared to 403,400 a year earlier.

The unemployment rate increased for 14 successive months, from the record low registered in June 2008, as since mid last year, Romania is dealing with the worst recession, after one decade of constant growth.

The unemployment rate, which is defined as the percentage of those in the labor force who are employed, is likely to reach 7.6% by year-end, from 4.4% in December 2008and 6.6% in August.

Previously, the institution had predicted a total number of jobless of 620,000 by year-end.

Buying power to strengthen to last year�s levels in 2012

The median income of Romanians will increase this year but slower than consumer prices, which would weaken the buying power by 2.2% , according to CNP’s autumn forecasts. Buying power will go up to last year’s record level as late as in 2012.

According to autumns forecasts, Romanians buying power will stagnate next year and will fail to recoup this year’s slump in 2011, when median income is expected to increase by as little as 1.3% in real terms. In 2012, the buying power will likely strengthen by 2.3%, CNP says.

In April this year, the institution had predicted a decline in median income by 1.9% in real terms for 2009. In 2008, the median income surged16.5% YoY in real terms.