Romania’s GDP is to grow between 2017 – 2020 at a more rapid pace than previously expected, according to the winter economic forecast by the National Commission for Prognosis (CNP). Data presented resemble an old joke about the yield per hectare, telling that we should stop harvesting because we already entered Bulgaria.
In the following article, we will analyse the spectacular growth that the data of the National Commission for Prognosis registered in just a few months: it is about the substantial increases, some of them spectacular, between the autumn and the winter 2016 economic forecast (made in January 2017). That is true, things have significantly changed after Santa’s visit.
How much a „growth” can grow in just 2 months: from 4.3 to 5.2
According to the official estimates, from 4.8% in 2016, the economic progress will increase to 5.2% next year and will go up to 5.7% in 2019 and 2020. It is noteworthy: the forecast made in autumn 2016 announced an increase of 4.3% in 2017: two months later, we find that this growth will be 5.2% in 2017.
It means that GDP will increase by 24% in real terms by 2020 instead of „only” 19%, as estimated by the same commission in the fall of 2016.
It can be seen how far the data presented now have advanced above those announced just a few months ago, by up to 1.5 percent at the end of this period of time.
(In the table – comparison between the forecasts made in autumn and now)
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- Economic growth compared to the previous year between 2015-2020
- Year
- GDP (billion lei) – winter 2017
- GDP (% compared to previous year) – January 2017
- GDP (compared to previous year %) – autumn 2016
- GDP (billion lei) –autumn 2016
- Source: CNP
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Besides, in the spirit of transition to the multilaterally developed capitalism, the actual individual consumption of households is expected to increase during 2017 – 2020 even beyond the cumulative economic growth of 24%, namely by slightly more than 26% (probably based on debt, as the internal source of consumption would not allow it, also according to the forecast).
(In the table – comparison between the forecasts made in autumn and now)
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- Household consumption compared to the previous year between 2015 – 2020
- Year
- Household consumption (% compared to last year) v. 2017
- Household consumption (% compared to last year) v. 2016
- Source: CNP, v.2016 = version autumn 2016 and v.2017 = version January 2017
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Economists go back to school: Trade balance is maintained, despite the show of increases
Ironically, though, the trade balance, despite the above increases of GDP and household consumption (and counter to the strengthening of our currency) will remain approximately the same as in the previous forecast.
That will be a remarkable achievement in itself and for the expansion and improvement of the economic theory.
(In the table – comparison between the forecasts made in autumn and now)
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- Evolution of the trade balance between 2017- 2020 (billion lei)
- Year
- Evolution of the trade balance v.2017
- Evolution of the trade balance v.2016
- Source: CNP, v.2016 = version autumn 2016 and v.2017 = version January 2017
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CNP’s economic forecast sees a declining euro exchange rate against leu from 4.49 lei/euro as average level for 2016 to 4.46 lei/euro for this year, with a trend of the domestic currency to appreciate toward 4.42 lei/euro in the years 2019-2020.
Again, the values announced in the winter economic forecast have frozen compared to the autumn version (unlike GDP) so we shall reveal how our economy will grow in euro:
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- Evolution of GDP and exchange rate between 2015-2020
- Year
- GDP (billion lei)
- Exchange rate (euro/leu)
- GDP (billion lei)
- Source: CNP, January 2017 prognosis
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Basically, CNP announces that an important part of the productivity progress (at this moment, according to the latest 2016 data, of – (MINUS) 1% !!) should lead towards strengthening the national currency, not only in real terms but also in terms of the nominal level compared to the European currency.
Consequently, Romanian economy would grow not by only 24% in euro in four years but 34%, which practically will scare the West and send the economists to depression.
Santa Claus has not forgotten about the forecasted wages either: more than double in just a few months. From 13.4% to 28.9%
The wage increase reached the peak last year but will remain in real terms, above the GDP growth until 2020. When it will be two percent higher than the previous forecast.
Altogether, net wages (cash in hand) will increase over the four years from 2017 to 2020 by a surplus of more than 300 lei compared to the expectations from the last fall and will advance in real terms by not only a lousy 13.4% (forecasted last fall) but an impressive 28.8% forecasted after Santa’s visit. That will be more than double and a totally different thing.
(In the table – comparison between the forecasts made in autumn and now)
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- Net wage evolution until 2020
- Year
- National net average wage (lei) v.2017
- (% real compared to the previous year) v.2017
- (% real compared to the previous year) v.2016
- National net average wage (lei)
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We can, therefore, rest assured that the good old days of the five-year plans and breaking the records of economic growth and welfare measured by more and more lei in the pocket seem to have returned, even at a higher quantity and quality level. This is just what the official economic forecast, which is under the authority of the Government, tells us.
