Romania, an emerging economy suffering like a developed one

Florin Citu
June 2012 Bucharest Romania

F L O R I N C I T U A D V I S O R Y

The story
Until 2007 both private and public sector increased deficits. It was a race to the bottom. After 2007 only public sector increased deficits, implicitly debt, in part transferred from the private sector. The private sector was not allowed to correct due to fear of social unrest and loss of political votes. After 5 years, we are left with massive public debt and a private sector that still needs to be restructured.
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The global growth story

10 8

World United States

European Union Emerging and developing economies

-2

-4

-6

1984

2007

2009

1980

1981

1982

1983

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2008

2010

F L O R I N C I T U A D V I S O R Y

2011

C/A balance as % of GDP

6

European Union
4

Emerging and developing economies

United States

-2

-4

-6

-8

2006

F L O R I N C I T U A D V I S O R Y

2011

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2007

2008

2009

2010

The world Inflation story

10 World Emerging and developing economies 8 European Union United States

-2 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

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What is the problem then?

Unemployment Public debt
Future growth

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Public Debt
120

Euro area Developing Asia

100 Latin America and the Caribbean Sub-Saharan Africa 80

Emerging and developing economies ASEAN-5

Middle East and North Africa United States

60

40

20

0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

F L O R I N C I T U A D V I S O R Y

Summary
World growth influenced by developed economies Inflation by emerging economies Future growth hampered by high public debt in developed economies What next for Romania?

F L O R I N C I T U A D V I S O R Y

Real GDP, Romania falls harder than EM countries

10 8 6

0 2000 -2 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

-4

Romania
-6

Emerging and developing economies

Euro area

-8

F L O R I N C I T U A D V I S O R Y

C/A balance, explains part of the fall in Romanian GDP

10

Romania
5

Emerging and developing economies

0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

-5

-10

-15

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Here is the first problem for Romania RO- exports, EU- Imports
30 25

Euro area Romania

20

15

10

2001

2000

2002

2003

2004

2005

2006

2007

2008

2009

2010

-5

-10

-15

F L O R I N C I T U A D V I S O R Y

2011

Austria

Finland France Greece (GR) Belgium Cyprus

Luxembourg Malta Netherlands

The second problem

Perioda responsabila pentru criza de astazi. Tari cu economii nerestructurate au avut parte

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Ireland Italy Slovenia

Portugal

Germany Spain

1993Mar 1993Aug 1994Jan 1994Jun 1994Nov 1995Apr 1995Sep 1996Feb 1996Jul 1996Dec 1997May 1997Oct 1998Mar 1998Aug 1999Jan 1999Jun 1999Nov 2000Apr 2000Sep 2001Feb 2001Jul 2001Dec 2002May 2002Oct 2003Mar 2003Aug 2004Jan 2004Jun 2004Nov 2005Apr 2005Sep 2006Feb 2006Jul 2006Dec 2007May 2007Oct 2008Mar 2008Aug 2009Jan 2009Jun 2009Nov 2010Apr 2010Sep 2011Feb 2011Jul 2011Dec 2012May 0 5 10 15 20 25 30

And this is the third EU unemployment and gross debt

90 10.5

General government gross debt

10 85

Unemployment rate

9.5 9 8.5

80

75 8 70 7.5

7
65 6.5 60 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 6

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F L O R I N C I T U A D V I S O R Y
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