The effects of an 8% drop in Romania’s economy

Sources close to the negotiation team of the International Monetary Fund (IMF) said yesterday that, considering the latest evolution of main macroeconomic indicators, a scenario including an economic decline of over eight percent and a budget deficit of nearly seven percent of gross domestic product (GDP) seems ever more realistic. According to analysts, a significant increase in the number of persons laid off will have a negative systemic effect, generating a rise in loan arrears and a forced drop in the net sales of companies, which will be forced to reduce production or the distribution volume due to a decline in consumption.

“Rising unemployment is the most worrisome indicator in a scenario of an eight percent decline in GDP. In this case, the amounts allocated for infrastructure projects, which could stimulate some sectors and generate new jobs, are very important,” the Chief Economist of Banca Comercială Română (BCR), Lucian Anghel, said.

An eight percent drop in GDP could also mean a four percent current account deficit, company restructuring, and a large number of bankruptcies.