The Effects of the Crisis
The end of the acute economic and financial crisis will come as early as the second semester of year 2010. Until then the economy will pass through a purgatory in which a lot of companies of all dimensions, specially SME’s and many entrepreneurships will disappear from the economic landscape. It is a normal aspect due to the competition of multinationals, once Romania entered EU, and the overlapping of this crisis of unforeseen precedent in the last decades.
A consequence will be the slow revival of the values from the real-estate industry, the sharp decline of its speculative character, as well as decent values for the companies from the other industries. The only companies which will significantly gain will be the ones in sectors like renewable energy, bio-technology, pharmaceuticals, or ecology.
The financial industry will be strongly impacted by both the loan deflation, with the supplementary risks imposed by the crisis, and the quick increase in the bad credits, which will determine a consolidation of the market, through mergers and acquisitions or the closing of banks’ subsidiaries. Either way the recovery of lending will be of long standing and will never be the same as in the period 2006-2008, not so much because of the losses that will occur in the system but because of regulation. This period of settlements that are more and more severe and done to prevent this kind of crisis, will be a long one.
I believe that Romania in general and Romanians in particular will end up with their feet on the ground, and will have to follow a long and difficult recovery with sacrifices, step by step, during at least one decade.
A beneficial succession of the crisis will be the dramatic change of mentalities, the correct appreciation of work and money at their true value and proper placement of each participant in the labor market, both in the private and public sectors. It will be a long a painful process but imminent and beneficial in the long run.
If in the previous years there were pressures on employers and the wages substantially outran the productivity level, this will not be possible anymore due to the crisis. Also, we will face the following years with high taxation levels for the payment of public debt, the high costs of the budgetary bureaucratic system, the spending related to the large number of unemployed and retirements, and also due to the investments in infrastructure without which Romania will remain an underdeveloped region of Europe, an unacceptable hypothesis for Europeans and for Romanians.
Dr. ec. Adrian Crivii, FRICS, MAA