The problem, to economists, was not whether the economy would shrink in the first quarter, but by how much. March data look bad, decline across the board – 18% for the processing industry, 11% for exports and so on and so forth, with construction being the notable exception, 30% growth year-on-year.
Economists were surprised to see the economic growth and believe the first quarter data provide the prospect for a V-shaped recovery, which means an abrupt decline should be followed by an equally abrupt recovery. The problem is how big this “V’ will be, which depends on long the decline lasts.
“There will be a V-shaped growth. It depends, however, on how deep this ‘V’ will be. We hope the worst is behind us, that we will reboot in the third quarter, but the data we have are terrifying, and a 5% to 6% decline will not be possible to avoid this year,” believes Ionut Dumitru, chief economist of Raiffeisen Bank.
To economist Laurian Lungu, the first quarter data are important, even though they cannot anticipate future developments.
“The first quarter data are extremely relevant. Because, even though the lockdown was put in place on March 16, the sales downward trend became visible on March 10 – here’s an economy that was in a serious crisis two thirds of one month and did not see a downturn. This is the big surprise, the nice surprise. These data make me think we will overcome the crisis easier. It all depends on the speed of economic recovery, however. If, in the EU, the severely affected manufacturing chains rebound, then we might have a faster recovery and the decline might not be so serious.”
Adrian Codirlasu, chairman of CFA Romania, believes the scenario of a V-shaped recovery is plausible, provided that the current downward trend of the number of confirmed COVID-19 cases should continue and no resurgence should happen.
“For each month of shutdown, the economy lost GDP points. This is why the first quarter results are positive.”
Romania staying in the “positive scenario” of the epidemic, with fewer cases, helps the economy recover faster because it provides hope, and hope matters tremendously in times of crisis, consumer spending included: the fewer people get sick and die, the more optimism; the more optimism, the more consumer spending; the more consumer spending, the faster the recovery, Codirlasu added.
“If the current trend of decline in the number of affected people continues, the V-shaped recovery scenario is plausible. If the trend reverses, there is no chance for such a scenario to happen.”
Economist Aurelian Dochia says the first quarter data fuel hope that the second quarter will not be so terrible.
“Even though 0.3% growth is within the margin for error, the first quarter data legitimize hope that the second quarter will not be as dramatic as expected.”
(English version by Loredana Fratila-Cristescu)