The world leads to double dip recessionand Romania is heavily influenced. Why? 5 reminders and 5 signs that we didn’t see the worst part yet

5 reminders – analyses

• Six months ago, I reminded to you my analysis about the world economy. There I was telling you that the “positive signs” were fake and I was  explaining why I expected things to be worse than most people announced:
  Yesterday’s bad news for World Economy and my analysis on 18.11.2009

• 3,5 months ago, I explained to you why Romania will not exit the crisis during 2010 and the economic problem will continue.
  Romanian economy keeps on falling, while dreamers keep on waiting millions to knock at their door

• One week later, I had presented to you the 3 possible scenarios for the future of Romanian economy, the positive, the negative and the most probable one:
  “When is this crisis going to end?”. The positive scenario for Romanian market
  “When is this crisis going to end?”. The negative and the “more realistic” scenario for Romanian market

• 3 months ago I shared with you my opinion regarding Romanian economy again. I focused on the lack of measures, which would clearly lead to more trouble…
  (No Martini = no party). No serious measures = no serious results

• During the same period, I also spoke about the VAT hike (which was denied by the officials back then) and presented the results it would bring to the Real Estate market.
  IMF asks VAT and tax on profits to skyrocket.What does this mean for the Real Estate market?

5 signs that “we didn’t see the worst part yet”

“USA leads to double dip recession”
This was expected. When Obama stopped pouring billions of dollars in consumption and social welfare, his country’s economy showed its weakness. Now the American President tries to postpone the worst part of the crisis, as he has elections in November. But even in the most favorable scenario for him (the problem to be hidden a bit more), we are almost sure that in 2011 the biggest economy of the world will reach new bottoms.

“China slows down”
While all the big economies are in trouble, or they implement austerity measures, it was normal for China to slow down as well. Exporters face difficulties, the Real Estate bubble is ready to burst, plus many other minor or major problems cause a slow down of the Chinese economy. The country’s GDP will remain positive ofcourse (and still very high, around 6 – 8%) but this new business environment will force Chinese companies to import less as well. So… trouble for everyone else too (including Japan which still didn’t recover yet).

“England just entered into the real trouble…”
Mervin King, the Governor of the National Bank of England, was clear: English banks need years to recover and until then the economy will face several challenges (also due to lack of financing). This is why the Bank worsened its predictions for England’s future. The new government has already announced austerity measures, which look (to analysts) just the first ones. More are expected to follow, as the country’s deficit is enormous.

Germany, France, Italy and Spain have unstable governments
In Germany Chancellor Merkel is facing major difficulties and the following months are considered critical for her future. In France people are very unhappy with Sarkozy, who appears to be involved in some scandals too. Italian politics can be compared only to a… soap opera and Berlusconi has too many “headaches”, while Zapatero in Spain avoided the fall of his government just for one vote (if I am not wrong). The major economies of Europe don’t seem too stable…

Romania is heavily influenced…
The Romanian State borrows money with Euribor + 5% margin. This means that all the local companies should start from Euribor + 6% and usually they will end up with +8%, even +10% or more. The country needs serious reforms, while it has problems in its agreement with the IMF – many people talk about a necessary new loan agreement with them. In the same time, European Grants are still not absorbed, public investments are down and tax evasion is up.

• Yesterday the chief economist of ING Bank predicted for 2011 a GDP contraction up to -2%. Unfortunately he expects new austerity measures too.
  Chideşciuc, ING: The economy will decrease with 2% in 2011. We will see new measures.
• Also we just found out that in the second quarter of the year the Romanian GDP fell again, by 0,6%. It is the seventh consecutive quarter of economic contraction.
  Romanian’s economy has dropped with 0.6% in the 2^nd semester comparing with the same period of the last year.

With the major economies of the world being in trouble, Romania can not expect any serious help from abroad.

The moment of important decisions is coming. Faster than many people expect…