The crisis to sweep through Romania’s economy

Some companies are already announcing drops in sales, while others are only saying that the evolution or regression will depend strictly on the economy’s development.

The energy sector, though theoretically little affected by the crisis, is the first to admit that 2009 will be a year marked by restructuring programs, when revenues will slide due to a drop in electricity and gas consumption, with companies in the fields considering layoffs.

The car industry is the second-largest field which is forecasting that 2009 will be a difficult year. Porsche, one of the leaders among local distributors, has already announced a 10 percent drop in sales. Dacia, the largest local car maker, has not yet made public forecasts for 2009, but has cut production and is sending people on forced leaves of absence, while revising 2008 sales estimates downward.

Alro Slatina, the largest aluminum producer in Central and Eastern Europe could cut production by up to a quarter and lay off a substantial number of employees, due to the recession. ArcelorMittal, the world’s top steel company, has not yet made public its 2009 forecast, but the end of 2008 is far from optimistic: half of the company’s employees are being sent home temporarily due to a lack of orders.

Petrom, Romania’s largest company, controlled by the Austrian OMV group, is prioritizing investment projects, and could speed up sales of non-core assets. Rompetrol, Petrom’s main competitor, is doing the same, while laying off 2,000 employees as a part of its restructuring program. LukOil Romania, division of the Russian LukOil group, has cut its 2009 investment plan some tenfold, and is not excluding personnel layoffs, if macroeconomic conditions worsen.

The largest state-owned electricity provider, Electrica, will consider a 5-10 percent cut in its delivery scenario when setting its 2009 budget, which will lead to a reevaluation of the company’s expenditure program. Transelectrica is expecting lower revenues due to a drop in consumption and energy transportation.

“You have to lay people off to contract activity when profit forecasts are facing a downward trend. Though it is thought that the most affected industries are the construction sector and the car industry, the shock wave of the financial crisis will sweep through all industries at every level,” a tax specialist, Gabriel Biris, said yesterday.

Representatives of Metro, the largest retailer on the domestic market, said it is not concerned about 2009. Officials of Terapia Ranbaxy, a major player on the Romanian pharmaceutical market, said that the main challenge in 2009 will be the depreciation of the local currency.

‘Let us not be fooled into thinking that someone will escape the crisis. Companies will be affected to a greater or lesser degree, considering each company’s business management”  Gabriel Biris tax specialist