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Intellinews - Romania Country Report- March 2013

  • March 2013
  • -
  • Emerging Markets Direct Media Holdings
  • -
  • 25 pages

First industry and foreign trade numbers released for 2013 were unexpectedly encouraging. Manufacturing’s activity expanded by 6.6% y/y in January, driven by the 6.1% y/y rise of exports*. CA’s balance moved in the surplus area once again in January – after it posted surpluses in two other months last year. Also, foreign investors were remarkably interested in local public debt – independent estimates put the related inflows at EUR 4bn [3% of GDP] in Q1, of which EUR 2bn was already confirmed by the ministry of finance**. This naturally strengthened the currency [see chart beside]. The inflows were reportedly encouraged by Romania’s issues being included in global indices – which is good, but also highlights the one-off pattern of the inflows. The inflows helped the Treasury borrow in Q1 more than planned and at decreasing cost. The Cyprus turmoil put an end however to the investors’ euphoria and the local currency’s strengthening in January-February has moderated in late March.

The side-effects of regional concerns were not major, yet enough to bring more rationality among investors: at the end, Romania is still a country that runs twin deficits, faces major problems in the real sector and the capacity of absorbing funds from the EU budget remains very weak amid poor administrative capacity.

Furthermore, the government has to speed up at unprecedented rate the structural reforms in the state-owned sector if it wants to complete the stand-by agreement with the IMF this summer. The government has just moderated the fiscal consolidation schedule [yet maintaining the broad medium-term targets] and the CA surplus in January is hardly sustainable unless the absorption of EU funds improves substantially. And to date there are no signs that such improvement is imminent. The government expects the intermediary payments from EU budget to resume only in H2. More than that, the EC will probably not loosen the absorption terms such as to allow Romania use funds under 2007-13 budget three years [instead of two as currently] after the period expires. Romania has used only 12.2% of the nearly EUR 20bn earmarked under 2007-13 EU budget.

* the high y/y growth might reflect orders/shipments postponed from December, when elections and small number of working days resulted in subdued activity
* as the rise in the stock of government securities held by non-residents.

Table Of Contents

Intellinews - Romania Country Report- March 2013
Table of Contents

Executive Summary
Relationship with IFIs
Real Sector
1. Corporate, structural reforms
2. GDP, Forecasts
3. Industry, Constructions, Retail
4. Prices, Inflation
5. Labour Market

Fiscal Sector
1. Budget Execution
2. EU Budget
3. Fiscal Policy, Public Debt

Financial Sector
Non Bank
1. Bank Loan Quality
2. Loans and Deposits
3. Corporate

External Sectors
1. Balance Payments
2. Foreign Trade
3. External Debt
4. Forex Reserves

List of Tables

Table 1: : Industrial production (%, y/y)
Table 2: Construction Works Volume Index (%, y/y)
Table 3: Retail Sales Volume Index (% y/y)
Table 4: Consumer, Producer Prices (%, y/y)
Table 5: Wages, employment
Table 6: General government budget (RON mn)
Table 7: Public Debt [% of GDP, eop, ESA meth.]
Table 8: Public Debt [eop, national methodology including borrowing from own reserves funds]
Table 9: Aggregate indicators for credit institutions (eop, unless otherwise indicated)
Table 10: Quality of the stock of bank loans (eop, RON mn unless otherwise indicated)
Table 11: Current Account (EUR mn)
Table 12: Romania CA balance 2012
Table 13: Foreign trade (EUR mn)
Table 14: : External debt (EUR mn)

List of Figures

Fig. 1: GDP, seas. adjusted (2005=100)
Fig. 2: Industrial production
Fig. 3: Industrial Production, seasonally and workday adjusted (2005=100)
Fig. 4: Industrial Production Volume Index, incl. 12-month average % y/y
Fig. 5: Construction Works Index (2005=100)
Fig. 6: Construction Works, seasonally and workday adjusted (2005=100)
Fig. 7: Construction Works Volume Index, incl. 12-month average % y/y
Fig. 8: Retail Sales Index, seas. adj. (2005=100)
Fig. 9: Retail Sales Volume Index, (2005=100)
Fig. 10: Consumer Price Index (y/y)
Fig. 11: PPI vs. CPI (y/y)
Fig. 12: Average net wage [2000=100]
Fig. 13: Public debt (EUR mn; national meth.)
Fig. 14: Net profit vs. provision cost (EUR)
Fig. 15: Provision cost [EUR mn, quarterly]
Fig. 16: Bad loans (EUR) and NPL ratio
Fig 17: Stock of bank loans [EUR mn]
Fig 18: Net balance with banks [EUR mn], by type of customer
Fig. 19: C/A deficit in rolling 12M
Fig. 20: Rolling 12M exports (EUR mn)
Fig. 21: FOB exports vs. imports (EUR mn)
Fig. 22: Exports (EUR mn)
Fig. 23: Foreign trade balance [EUR mn]
Fig. 24: Forex reserves at BNR (EUR mn)
Fig. 25: External debt (EUR mn)

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