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Romania Country Report - June, 2016

  • June 2016
  • -
  • Emerging Markets Direct Media Holdings
  • -
  • 37 pages

The report covers info as of June 28.



Rising private consumption pushed up both the production and the expenditure sides of GDP by 4.3% y/y in Q1, data from the statistics office show.

Retail sales soared by 19% y/y in Q1 in volume, as real wages surged by 15% y/y, the propensity to saving plummeted because of diverse factors including interest rates and consumer confidence. Some of the massive increase in mortgage lending also fuelled consumption, as loans were used to buy existing properties.



Household consumption increased by 9.2% y/y and contributed 6.6pp to the GDP advance, while on the production side, services - most likely wholesale and retail trade - capitalised on the consumption euphoria and captured 13.1% more value added than last year, contributing 2.1pp to the GDP growth.



Key Points

oRomania's Social Democratic Party dominates local elections

oGDP soars by 4.3% y/y in Q1 on rising consumption; GDP per capita second lowest in EU

oIndustrial output accelerates to 3.5% y/y growth in April

oConstruction work 12.6% up y/y in April as more civil engineering projects launched

oRetail sales 19.1% up y/y in April

oHeadline inflation hits minus 3.5% y/y before expected upward correction in June

oAverage net wage growth further accelerates in April; century needed for Romanian labour cost to converge with EU28 average

oRegistered unemployment falls 11% y/y in April; employers report strongest hiring plans in eight years

oBudget balance posts 0.1%-of-GDP deficit in Jan-May

oEU funds absorption rate for 2007-2013 budget hits 69.2% one month before deadline

oPublic debt rises to 38.3% of GDP at end-April

oNPL ratio down 6.18pp to 13.11% at end-April

oLoan portfolio of banks 2.4% up y/y at end-May on strong mortgage lending

oC/A balance deteriorates to 1.1% deficit of GDP in Jan-Apr

oExport growth accelerates to 6.9% y/y in April, imports 9.8% up y/y


Table Of Contents

Romania Country Report - June, 2016
EXECUTIVE SUMMARY5

POLITICS6

Romania's Social Democratic Party dominates local elections6

President objects to bill that weakens anti-corruption regulations6

Protest against Parliament's recent unpopular decisions7

REAL SECTOR8

1. Corporate, structural reforms8

2. GDP, forecasts8

CFA confidence index increases for third straight month in May8

World Bank keeps growth projections for Romania unchanged8

GDP soars by 4.3% y/y in Q1 on rising consumption8

2015 GDP per capita second lowest in EU, Eurostat says10

3. Industry, Constructions, Retail11

Industrial output accelerates to 3.5% y/y growth in April11

Electricity consumption 11.3% up y/y in January-April12

Construction work 12.6% up y/y in April as more civil engineering projects launched12

Retail sales 19.1% up y/y in April13

4. Prices, Inflation15

Headline inflation hits minus 3.5% y/y before expected upward correction in June15

Industrial price inflation moves upward to minus 2.95% y/y in April15

5. Labour Market17

Average net wage growth accelerates in April17

Century needed for Romanian labour cost to converge with EU28 average17

Registered unemployment falls 11% y/y in April19

ILO unemployment remains subdued in Romania amid tight labour market19

Romanian employers report strongest hiring plans in eight years20

FISCAL SECTOR21

Romania records highest VAT gap in CEE in 2015, PwC study shows21

Finance minister rules out 5pp cut in social security contributions...21

... BUT REMAINS committed to going forward with tax cuts, cites robust tax collection22

1. Budget Execution22

Budget balance posts 0.1%-of-GDP deficit in Jan-May22

EU funds absorption rate for 2007-2013 budget hits 69.2% one month before deadline24

2. Public Debt25

Public debt rises to 38.3% of GDP at end-April25

FINANCIAL SECTOR26

1.Bank Loan Quality26

NPL ratio down 6.18pp to 13.11% at end-April26

Overdue loans 13.4% down in Mar-May28

2. LOANS, DEPOSITS29

Loan portfolio of banks 2.4% up y/y at end-May on strong mortgage lending29

3. CORPORATE31

BCR reportedly completes sale of EUR1.1bn NPL bundle31

Insurance market expands 5.4% y/y in first quarter31

Leasing market 30% up y/y to EUR456mn in first quarter32

EXTERNAL SECTOR32

1.Balance of Payments32

C/A balance deteriorates to 1.1% deficit of GDP in Jan-Apr32

Foreign direct investors re-invested EUR502mn of EUR1.8bn Q1 income33

2. Foreign Trade34

Export growth accelerates to 6.9% y/y in April, imports 9.8% up y/y34

2.External Debt35

Gross external debt down 4.2% y/y to EUR88.4bn at end-Apr35

3.Forex Reserves36

Gross foreign reserves at Romania's central bank EUR1.2bn up m/m in May on Eurobond issue36


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