Optimism, fears and hope  

Optimism, fears and hope
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According to the latest business opinion polls, the main concerns of the company managers are: pandemics (52%), cyber threats (47%), over-regulation (42%), public policy uncertainty (38%) and uncertain economic growth (35%), a recent PwC study shows. Hence it is not just the pandemic that scares. The real economy is also afraid of the way the governments react to crisis (over-regulation, over-taxation). Many fear that the changes in fiscal policy caused by the increase in the level of public debt during the pandemic could lead to an increase of the total fiscal obligations of the organizations in the post-pandemic period.

The fiscal incentives granted by governments in the past 12 months were aimed at keeping afloat many economic sectors and many supply chains, preserving jobs and rescuing tens of thousands of companies whose turnover had plunged toward zero due to the blockades imposed by countries in order to combat the pandemic. But the same fiscal incentives also led to a deterioration in the fiscal indicators of all countries and an increase in public debt. Budgetary imbalances and public debt coverage will become a priority, and also a significant political and economic burden in the coming years.

It is obvious that, politically speaking, it is difficult to enforce public spending cuts in the near future, since a very high level of public spending keeps the real economy afloat. Moreover, the pandemic highlighted the need to increase the public spending in many sectors, especially in the healthcare sector, and not only. Economist Simon Johnson recently commented that, since the pandemic is not at all overcome, the world urgently needs a new global health system, just as, following the 2008 crisis, the world needed a new financial system.

The analogy with the 2008 crisis and with the manner of intervention of the governments is often discussed. Following the global financial crisis of 2008, substantial resources were allocated to improve the safety of the global financial system. Mohamed A. El-Erian (former Chairman of US President Barack Obama’s Global Development Council for 4 years in a row, named one of the top 100 global foreign policy thinkers) says that, after the global financial crisis of 2008, the governments of advanced economies have sworn that they would never let the banking system “hold hostage the politics, let alone threaten the economic and social welfare.” But today, thirteen years later and in the midst of a pandemic crisis, it is clear that much of the funding now risks ruining what could be an inclusive and lasting
recovery from the terrible COVID-19 shock.

Nevertheless, it is well known the fact that the optimism is people’s tendency to see the bright side of things and it is also the attitude of one who confidently sees life and future. In economics, optimism is synonymous with confidence, which is essential for a proper money flow. Romania seems to enjoy an increasing number of optimists who place the evolution of the domestic economy at the top of recovery in Europe. Let’s first look at the data: according to the INS, Romania’s GDP jumped up 2.8% in the first quarter of the year as compared to the fourth quarter of 2020, and the main foreign financial partners see in a very good light the evolution of the Romanian economy until the end of this year. The World Bank foresees a 6% growth of the domestic GDP in 2021, and the IMF estimates a strong economic recovery, with a 7% GDP jump. According to the European Commission’s spring economic forecasts, Romania will have an economic growth of 5.1% in 2021 and 4.9% in 2022.

The key word that seems to be at the origin of these figures is precisely “confidence”: “The shock generated by the pandemic has been successfully managed, and all these efforts have led to an increase in the level of confidence, so necessary for us to get through this crisis”, said Andrei Cionca, CEO of Impetum Group, commenting on the recent edition of the CONFIDEX study, which measures Romanian managers’ confidence in the economy. The data of the study show that, after the initial shock of the pandemic, the Romanian economy registered a permanent growth, without turbulence, based on the strategic option of the managers to increase productivity, to the detriment of those who chose to cut costs. And the figures on the attitude towards investments are correlated with the propensity for increased productivity. The evolution in the past year of CONFIDEX index shows a growing yet fluctuating optimism, marked not only by the pandemic crisis itself, but also by other factors that influence the economy.

Confidence in economy is a conclusion also present in PwC’s recent research, which shows that the optimism of Romanian CEOs about the recovery of the global economy has reached its highest level in the past ten years, with 60% of respondents thinking that economy status will improve in the coming 12 months. For the next three years, the level of optimism about the increase in the number of employees increases, eight out of ten general managers in Romania estimating a rise in the number of newly created jobs. According to CEO Survey 2021, although the anxiety about the pandemic has not yet disappeared and it remains number one among the top threats to economic growth and companies both globally and in our country, the CEOs in Romania prove to be more optimistic than in the previous years, yet still slightly more cautious in their forecasts than their global (76%) and Central and Eastern Europe (64%) counterparts.

But the economic recovery viewed with great optimism by the business leaders should be quickly seen also in households and in the economic life of every single person. The efforts for recovery from the coronavirus pandemic crisis should offer comprehensive social protection, provide vaccines to as many people as possible quickly, and build their confidence in tomorrow. The higher number of optimists we have among the active population, the more the confidence will turn “economic growth” into “development” and “well-being”.

People now need to be aware of a sustained effort both to eradicate COVID-19 and to strengthen the healthcare system in the face of other possible pandemics. Also a wise political effort is needed, to facilitate a strong and rapid economic recovery and remove the threat to economic well-being and the fears of company managers. There are enough fears, we have optimism, and hope is the last to die.

 

Daniel Apostol

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27 November 2021

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