After a sharp slowdown in 2012, the economy rebounded strongly in 2013, with real GDP up 3.5%. After the formation of a new ruling coalition in March 2014 and as presidential elections set for November approach, the government intends to stimulate activity while respecting overall fiscal balances. Thus there is a vital need to fight tax evasion and corruption and to streamline EU funds absorption.
A spectacular recovery
Over the past five years, economic growth has been very jerky. In fall 2008, the global financial crisis abruptly cut short a very rapid catching-up movement – part of the dynamic momentum created by joining the European Union on 1 January 2007 – that verged on overheating. The recovery that followed the severe recession of 2009 and 2010 proved to be short lived, and growth slipped back to only 0.7% in 2012. This slowdown reflects in part a poor harvest in a country where agriculture accounts for more than 7% of GDP. Moreover, it occurred against the backdrop of political tensions between the current president, Traian Basescu, and the Social Democratic prime minister, Victor Ponta, who came to power in May 2012. The conflict between Traian Basescu and Victor Ponta culminated in an impeachment procedure against the head of state, that was approved by a July 2012 referendum, but invalidated the following month by the Constitutional Court due to insufficient voter turnout.
Following legislative elections in December 2012, the Social Liberal Union’s victory (this coalition comprised the Social- Democratic Party and a center-right alliance gathering the National-Liberal Party and the Conservative Party) consolidated Victor Ponta’s position and helped pacify relations at the head of the executive until February 2014. This more peaceful climate improved visibility over the political situation in 2013 and helped restore household and investor confidence. Against this backdrop, growth accelerated rapidly and even reached 5.1% y/y in Q4, bringing full-year growth to 3.5%. The recovery was buoyed by a spectacular export performance (13% in volume in the first 3 quarters of 2013 compared to the same period in 2012), notably in the automobile industry and services. It also reflects a very big increase in agricultural output, thanks to particularly favourable weather conditions.
BY Alexandre VINCENT