ING: Romania likely to emerge from recession in Q2, 2010

Romanian economy may emerge from recession in the second quarter 2010, when the GDP growth is likely to be heading into the positive territory, ING says.

Over the next three months, the Romanian economy will stop falling and will advance quarter-on-quarter, in line with the euro area, ING says.

“The slowdown in the Eurozone’s contraction in 2Q09 to just -0.1% was already visible in the sharply lower QoQ contraction in the Romanian economy – ‘just’ -1.2% vs -4.6% in 1Q09. For this reason, if Eurozone growth picks up, we should see positive growth in Romania in 4Q09 which is in line with our view since January”, according to the ING report.

Moreover, given the ‘beta’ of the Romanian economy is greater than one, this also means Romania’s 4Q09 quarterly growth rate should be greater than that of the Eurozone.

“It might push growth into positive territory for full-year 2010 and also bring positive growth rates when expressed in annual terms faster than we expected (2Q10 might be positive vs our current expectations of 3Q10 to be positive)”, report says.

Nonetheless, with the positive contribution from net exports likely to diminish during 2010 and considering our view for rising unemployment along with slow wage growth, household spending should remain rather weak. “As a result, a robust recovery seems too much to hope for”, report says.

Romania’s Gross Domestic Product fell for at least two quarters, by 6.2% in first quarter and 8.7% in the second quarter, according to data provided by the National Institute of Statistics.

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