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Romania Country Report - October, 2015

  • October 2015
  • -
  • Emerging Markets Direct Media Holdings
  • -
  • 31 pages

Summary

Table of Contents

The report covers info as of October 27.



Romania's economy prepares for robust growth of above 3% this year and even more in 2016. But the fiscal slippage risks are rising as the government is endorsing measures with significant impact on budget. The EC and IMF expect the deficit to widen toward 3% of GDP next year and exceed this threshold in 2017 under current fiscal regime. The public debt is around 40% of GDP and the exposure to volatile external financing conditions is moderate.



Romania's macro-fiscal fundamentals are sound, and export growth has remained solid even in the context of weak external demand, the World Bank said in its economic outlook for the Europe and Central Asia region, Low Commodity Prices and Weak Currencies, released on October 26.



Romania's GDP will accelerate to 3.9% y/y in 2016, from 3.4% y/y in 2015, according to the International Monetary Fund's latest World Economic Outlook report, issued on October 6. The country's economic advance would thus be the highest among European economies in 2016, after being significantly above the average (1.9%) this year.



But the IMF also warned on fiscal slippage risks. Romania's adopted and intended policies will push the country's fiscal deficit close to 3% of GDP in 2016 and above that threshold in 2017, unless offsetting measures are identified or capital spending is again not fully carried out, the International Monetary Fund warned in the statement issued at the end of a staff visit in Romania.



Key Points

oRomania's government survives no-confidence vote

oS&P affirms Romania's sovereign rating, issues moderate growth forecast;

oRomania wants flexible arrangement with IMF, no fiscal constraints; IMF warns Romania's fiscal deficit is "set to rise significantly"

oIMF expects Romania's GDP to accelerate to 3.9% y/y in 2016; medium-term growth seen at 3.3%

oRomania revises Q2 GDP growth to 3.4%, from 3.3%; GDP increased by 3.8% y/y in H1

oRomania's industrial output 6% up y/y in August

oConstruction work in Romania up 10.8% y/y in August

oRomania's retail sales up 9.6% y/y in August on VAT rate cut for food

oRomania's consumer prices 0.26% up m/m in September

oRomanian wages up 9.8% y/y in August - in new post-recession record advance

oGeneral government posts 0.9%-of-GDP surplus in Jan-Sep ; Romania's Fiscal Council warns of costly fiscal slippage in medium term

oRomania drafts second budget revision, keeps deficit target at 1.85% of GDP

oRomania's current absorption of EU funds up only 2.2pp q/q to 57% at end-Sep

oPublic debt-to-GDP ratio down 0.8pp to 37.5% at end-August under ESA

oRomania issues EUR2bn worth of 10-year, 20-year Eurobonds

oRomania keeps policy interest rate at 1.75% amid medium-term inflationary pressures

oGrowth of mortgage loans in Romania accelerate to 14.3% y/y at end-Sep

oLoan-to-deposit ratio down to 92.2% in Romania at end-September on rising deposits

oRomania's C/A deficit halves y/y to EUR585mn in Jan-Aug

oRomania's trade gap widens by 94% y/y in August

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