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26 martie, 2024

13 octombrie, 2016

mp21The National Institute of Statistics announced the final value of GDP for 2014 at 668,143.6 million lei, in current prices, representing a growth rate of 3.1% in real terms as compared to 2013. As compared to the semi-final version of 667,577.4 million lei, the growth was less significant (+ 0.08%), but enough to change the value of 3.0% announced one year ago for the economic growth in 2014.

Thus, the seven-year cycle of 2008 – 2014 ended almost exactly to zero. After the great growth of + 8.5% in the second year of EU membership and the emerging effects of the economic crisis, two years of decline and two years of stabilization followed and another two years were needed to return in real terms to the GDP from 2008 (see table).

tabel1-8-e1476279565389


*

  • GDP evolution between 2008-2014 (final values)
  • Year    2008    2009    2010    2011    2012    2013    2014    average for 2009-2014
  • GDP growth
  • GDP level (2008=100)
  • Source: INS, own calculation

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The lessons:

The data presented are a good opportunity to evaluate what remained after the consumerist fever from the years 2007-2008, when we were thinking that Romania will reach like a shot new heights in capitalist development. The first observation is that the standard of living we had in mind back then, in full electoral period, did not materialize in reality.

Average economic results of the years 2009 – 2014 were more than five percent below the evolution in 2008 and there was no such thing as the increases envisaged when they were awarded increases of pensions and salaries while simultaneously lowering social security contributions (sound familiar even to what is circulating during these days, right?).


In short, the exchange rate went from 3.34 lei in 2007 to 3.68 lei in 2008 and 4.24 lei in 2009 and the public debt skyrocketed from about 20% to 40% after the IMF agreement (to be noted how, in a mathematical coincidence, five times four is 20% of GDP) and stabilized below 40% only after we reached the level of GDP from 2008 based on which the super benefits were offered at the end that year.

In addition, since we went from 0 payment obligations by transfer from other taxes and duties than those specifically related to the social security to about EUR 4 billion yearly hole in the CAS based pension system (reduced on the ground of taxation mitigation) – a hole that we must cover each year from the state budget – we eased down the construction of highways.

If we look on the map at the lack of a quick connection between Transylvania and Wallachia or Moldova, maybe we should think of this deficit that has to be covered year after year only for pensions – from 0 to EUR 4 billion – and to remember the saying „here is your money.”

Moreover, for the last two months from 2009 when we had no more money for pensions and we used in a quite exceptional manner the money from an IMF instalment, we paid interest all during the past seven years and we still have to pay the principal amount.

Going back to the growth forcing, the result of -5.2% average standard of living from 2009 to 2014 as compared to 2008 could be adjusted to + 2.9% as compared to 2007. That would have been more reasonable, with an amendment: to not count one’s chickens before they are hatched – the same we do now, though. Perhaps we could have limited ourselves to some smaller but more sustainable growth rates of revenues in 2008, to prudent tax reductions and would have avoided shocks like the one in 2010 with the 25% wage cut.

It would have been better for the exchange rate, also for the instalments paid and the devaluation of the properties. We did not realize then, but we could at least learn from the experience. Unfortunately, we seem to have too short memory, and given the momentum of the electoral period, the risk of making the same mistakes is looming.

Hoping that this time will go out otherwise, we stubbornly do the same. But the bad news is that summer is the same as winter and five times four is still 20. We already allocate nearly 2% of GDP to pay for the left-right consumerist extravagances from the past (not much about highways or urban infrastructure).

As regards the reimbursement of the costs of the experiment undertaken in 2008 with the consequence of EU-IMF-World Bank Agreement in 2009, it still continues until 2023, according to the payment schedule available on the Ministry of Public Finance’s website.

Can we now add something to consumption – just like the last time – with the effects in 2020 and leave – also like the last time – the bill this time for the years 2030-2040?

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