Financial, real estate services and trade, which have the largest contribution to GDP formation, of 50%, reduced their share in the GDP, because of the contraction of domestic demand, and the prospects of a strong recovery are weak.
In the years before the crisis, economic growth largely relied on debt-fueled consumer spending, and the contribution of services and of construction to GDP increased. But these sectors were the hardest hit by recession.
Romania’s future economic growth needs to be based on solid foundations, which would no longer create external imbalances – this is one of the conclusions of the debates surrounding economic recovery. The country, however, does not have many financial resources available to finance sustainable economic growth, with the exception of EU funds, an area where progress has been lackluster.
After the start of the crisis, there was a lot of discussion on the change in the model of economic growth, considering that the overheating of the economy in 2007 and 2008 was largely due to excessive consumer spending.
Since the crisis started in Romania, many entrepreneurs, managers and bankers are talking about encouraging private consumption as a means of restarting the economy, but central bank governor Mugur Isarescu warned that this was “a dangerous idea”, citing the political parties’ inclination towards election giveaways.
The future’s sustainable growth will have to rely on industry and exports, without overlooking domestic demand, says Dan Bucsa, citing Poland’s example, the only economy in Europe to have avoided recession by taking advantage of exporters’ competitiveness and of the stable domestic demand.
There has been a noticeable rise in global demand for food products. Considering the significant farming potential of Romania and the shift in the focus of investments towards the agricultural sector, Melania Hancila, chief economist of Volksbank, expects a gradual increase in the contribution of the farming sector to GDP and a robust growth rate of the sector in the medium and long term.
On the other hand, Catalina Molnar, senior economist of RBS Bank, believes it is normal to see a long-term decline in the contribution of agriculture to GDP formation, leaving room for other sectors that bring higher added value per product/service.