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Romania Country Report - December, 2014

  • January 2015
  • -
  • Emerging Markets Direct Media Holdings
  • -
  • 30 pages

The report covers info as of January 19.



The domestic macroeconomic conditions have improved surprisingly through 2014, despite government cutting the investments by a massive 25%. Euro area's uncertain outlook, ahead of elections in Greece and ECB steps aimed at fighting deflation, is the main threat to country's further growth - more important than the crisis in Ukraine that is also far from finding a resolution. On the upside, the low energy prices have a positive and immediate impact on country's performance.

The 2.9% y/y GDP growth in Jan-Sep was driven solely by the public consumption, hence it was not exactly sustainable. Furthermore data is slightly inconsistent with the preliminary budget execution figures. Earlier in 2013, the 3.5% growth was driven by external demand [net exports]. In 2015, the growth is supposed to come from a combination of consumption and investments.



Politically, the situation remains complicated but not tense. After winning the presidential elections, main opposition party PNL wants to take full power. Far from being hostile to senior ruling PSD, it explores ways to overthrow the cabinet of PM Victor Ponta. PM Ponta in his turn has adjusted his rhetoric and plans to stay in office by the end of his term in the fall of 2016.



Key Points

oEBRD keeps 2015 GDP growth forecast for Romania at 2.8%

oIndustrial output marginally up in November, grows by 0.2% y/y; up 6.% y/y in rolling 12 months

oExports lose momentum, still grow 2.3% y/y in November; up 7.5% y/y in rolling 12 months

oConstruction work up 2.2% up y/y in November, after disappointing year; 8.6% down y/y in rolling 12 months

oRetail sales rises for 15th month in row, up 7.1% y/y in November; up 7.2% y/y in rolling 12 months

oHeadline inflation eases to 0.83% y/y on lower fuel prices; c-bank cuts policy interest rate by 25bp to 2.5%, more cuts to follow

oBudget deficit hits 1.98% of GDP in 2014 - preliminary data

oRomania to issue Eurobond in H1, extend maturity over 10 years

oCHF strengthening no risk to Romanian banking system stability - c-bank

oCleaning of Romanian banks' balance sheets loses momentum in Oct-Nov

oC/A gap narrows by 62% y/y to some 0.2% of GDP in Jan-Nov

Table Of Contents

Romania Country Report - December, 2014
EXECUTIVE SUMMARY4

POLITICS5

Opposition party elects co-president to replace Klaus Iohannis6

Main opposition party to submit no-confidence motion against government5

Rebel leftist politicians Vanghelie and Geoana want to set up own party, overthrow government6

RELATIONSHIP WITH IFIs6

REAL SECTOR7

1. Corporate, structural reforms7

2. GDP, forecasts7

Romania revises Q3 2014 GDP growth to 3.3%; domestic demand revised upwards significantly7

EBRD keeps 2015 GDP growth forecast for Romania at 2.8%9

3. Industry, Constructions, Retail9

Romania's industrial output marginally up in November9

Primary energy resources used in Romania up 2.4% y/y in Jan-Nov, as more crude oil refined10

Turnover of Romanian corporate services firms up by 6.4% y/y in November10

Construction work in Romania up 2.2% up y/y in November, after disappointing year11

Retail sales rises for 15th month in row, up 7.1% y/y in November12

Sales of services to Romanian households grow by 1.5% y/y in Jan-Nov13

4. Prices, Inflation14

Headline inflation eases to 0.83% y/y on lower fuel prices14

Industrial prices down 0.15% y/y driven by energy, external prices14

5. Labour Market16

Net wages up 4.3% y/y in November16

Romanians' per capita income up 5.8% y/y in Q317

ILO unemployment 0.4% down y/y to 6.5% in November16

FISCAL SECTOR17

1. Budget Execution17

Budget deficit hits 1.98% of GDP in 201417

2. Public Debt18

Romania to issue Eurobond in H1, extend maturity over 10 years18

FINANCIAL SECTOR19

CHF strengthening no risk to Romanian banking system stability - c-bank19

Romania to enact personal bankruptcy law amid CHF loans crisis19

Central bank cuts policy interest rate by 25bp to 2.5%20

National currency weakens by real 0.7% m/m in December20

1.Bank Loan Quality.22

Cleaning of Romanian banks' balance sheets loses momentum in Oct-Nov22

2. LOANS, DEPOSITS24

Bank lending slightly gains ground24

Deposit base of Romanian banks keeps rising, by 6.2% y/y in euros as of end-Nov25

3. CORPORATE26

Volksbank, OTP Romania take temporary measures to help CHF loan debtors26

EXTERNAL SECTOR26

1. Balance of Payments26

C/A gap narrows by 62% y/y to some 0.2% of GDP in Jan-Nov26

2. Foreign Trade28

Romania's 12-month rolling FOB trade gap steady around EUR3.4bn28

Romania's exports lose momentum, still grow 2.3% y/y in November29

3. External Debt29

4. Forex Reserves30

Foreign exchange reserves down 1% y/y to EUR32.2bn at end-201430





Table 1: GDP in Jan-Sep, countribution of sectors and dynamics per sector8

Table 2: Industrial production [%, y/y]10

Table 3: Construction Works Volume Index [%, y/y]12

Table 4: Retail Sales Volume Index [% y/y]13

Table 5: Industrial Production Price Index, y/y15

Table 6: Consumer, Producer Prices [%, y/y]15

Table 7: Wages, employment17

Table 8: General government budget [RON mn]18

Table 9: Romania's gross public debt under ESA [monthly, RON, EUR bn, % of GDP +breakdown]19

Table 10: BIS-reporting banks' exposure to individual emerging europe countries, inflows/outflows [USD mn, %]21

Table 11: Aggregate indicators for credit institutions [eop, unless otherwise indicated]22

Table 12: Romania CA balance Jan-Nov 2014 [BPM6]28

Table 13: Foreign trade [EUR mn]28

Table 14: External debt [EUR mn]29





Fig. 1: Seasonally adjusted GDP7

Fig. 2: Drivers of GDP growth, utilisation side [main elements]8

Fig. 3: Drivers of GDP growth, utilisation side [detailed]8

Fig. 4: Drivers of GDP growth, formation side9

Fig. 5: Industrial production [2010=100]9

Fig. 6: Industrial Production, seasonally and workday adjusted [2010=100]10

Fig. 7: Industrial Production Volume Index, % y/y incl. 12-month average10

Fig. 8: Construction Works Index [2010=100]11

Fig. 9: Construction Works, seasonally and workday adjusted [2010=100]12

Fig. 10: Construction Works Volume Index, incl. 12-month average % y/y12

Fig. 11: Retail Sales Index, seas. adj. [2010=100]13

Fig. 12: Retail Sales Volume Index, [2010=100]13

Fig. 13: Consumer Price Index [y/y]14

Fig. 14: PPI vs. CPI [y/y]15

Fig. 15: Industrial production price: domestic vs. external16

Fig. 16: Average net wage [2000=100]16

Fig. 17: Employment vs. unemployment17

Fig. 18: romania's public debt [% of GDP]19

Fig. 19: Quarterly inflows/outflows, % of exposure at beginning of quarter [%]: Romania vs. emerging Europe22

Fig. 20: Banking system's net profits [EUR]22

Fig. 21: NPL ratio22

Fig. 22: Off-balance sheet loans, loans due over 90 days [RON mn]23

Fig. 23: Overdue payments on bank loans24

Fig. 24: Stock of non-gov bank loans [EUR mn]24

Fig. 25: Non-government deposits25

Fig. 26: Primary Income outflows [rolling 12M, EUR mn]27

Fig. 27: Net flow of Foreign Direct Investments [rolling 12M EUR mn]27

Fig. 28: Foreign trade balance [EUR mn]28

Fig. 29: Rolling 12M exports [EUR mn]29

Fig. 30: FOB exports vs. imports [EUR mn]29

Fig. 31: Exports [EUR mn]29


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