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Intellinews Romania Country Report - Issue 4 2012
Emerging Markets Direct, May 2012, Pages: 21
The IntelliNews Romania Country Report is a monthly report, covering the major macroeconomic indicators and trends in Romania, as well as important political developments. Prepared by local analysts, it provides the most accurate data, updated regularly according to the data changes noted by the whole range of statistics sources. It will save the time you would need to track the figures and sources independently and will provide you with thorough analysis.
A new cabinet formed by centre-left alliance USL is expected to take office on May 7, after the centre-right ruling coalition was ousted on April 27 by a non-confidence motion in parliament. PM designated Ponta stressed that the new cabinet plans to keep the programme with the IMF on track, observing the targets already set and re-negotiating specific policies within these, mainly fiscal, limitations. Ponta also said that if everything goes according to the plan, the new government would endorse the LoI on May 8. According to the polls, the emerging ruling coalition stands serious chances to rule after the parliamentary elections this fall. It will however have to cohabitate with President Traian Basescu, the political sponsor of the outgoing cabinet of PM Emil Boc.
The new cabinet takes the office under rather harsh economic circumstances and furthermore it has to deal with several hot topics plus many deadlines postponed during the first year of the stand-by agreement with the IMF. Weaker external demand already made an impact on the industrial production and exports. Romania's exports decreased by 0.4% on the year to EUR 3.5bn in February, showing signs of fatigue after more than two years of sound expansion. The industrial production index went down by an annual 1.2% in February as the decline in the core manufacturing sector was even a steeper 3.3% on the year. The construction activity strengthened on the year [by 7.4% y/y in February], but this is irrelevant for the winter season.
The activity indeed recovered in retail, where sales were 1.3% y/y in the month, but nothing impressive or sustainable [supported by higher wages]. The households remain conservative in regard to consumption/savings as their Households' surplus balance with the banks improved to EUR 2.79bn at the end of March from EUR 1.97bn at end-2011.
The absorption of EU funds remained very disappointing during Q1, in spite of being declared one of the key targets of the government. Romania's EU funds absorption increased by only 1pps year-to-date in the first quarter of 2012 to 6.65% of the total amount earmarked for 2007-2013. The government has set a 20pps increase target for the whole year.
Outgoing finance minister Dragoi claims that GDP increased by 1.5% y/y in Q1, but even this modest advance would be rather surprising and circumstantial judging from the existing shortterm indicators.
The banking system seems to have enjoyed the transfer to IFRS provisioning and the revised credit quality data must have improved [central bank delayed releases of credit quality indicators], but the payment discipline as indicated by the stock of overdue payment of bank loan holders has further deteriorated in Q1. The overdue payments measured 10.2% of the total stock of bank loans at the end of Q1 from 9.9% at the end of 2011 and 8.7% at the end of Q1/2011. More than 23% of the loans were either bad or doubtful loans at the end of 2011.
The budget execution for Q1 was in line with the targets set under the SBA with the IMF. The Treasury also accumulated a large buffer of liquidity under the USD 2.25bn bonds on the US market and by massive borrowing on the local market. The public debt remains moderate, at 31.7% of GDP under ESA95 methodology.
New ruling coalition still to define own policy
The jury is out in regard to emerging ruling coalition's further performance.
RELATIONSHIP WITH IFIs
IMF accepts to start talks with Romania's candidate ministers
Romania's political uncertainty rises, might endanger fiscal policy – Fitch.
IMF sees Romania's long-term GDP growth potential at 4%
Romania to negotiate EUR 1bn World Bank funding.
Romania's EU funds absorption improves by only 1pps to 6.56% in Q1 2012.
Centre-right opposition to form new cabinet six months before parliamentary elections
PM designate Victor Ponta sketches new cabinet.
PM designate Ponta sketches new cabinet and strategy
1. Corporate, structural reforms
2. GDP, forecasts
Q1 GDP up 1.5% y/y – outgoing finance minister.
3. Industry, Constructions, Retail
Industrial output down 1.2% y/y in February 2012.
Construction works volume up 7.4% y/y in February.
Retail sales up 1.3% y/y in February
4. Prices, Inflation
Industrial producer price inflation moderates to 5.9% y/y in February
5. Labour Market
Unemployment rate down 0.9pps y/y to 5.1% at end-March 2012.
New government to re-negotiate 2012 budget deficit target.
1. Budget Execution
Government deficit narrows to 0.56% of GDP in Q1
Romania's budget deficit narrows to 5.2% of GDP in 2011 – Eurostat
2. Fiscal Policy, Public Debt
Romania's 5-yr CDS price drops by 131bps in Q1, 2012 – CMA DataVision
Public debt 15.6% up y/y at end-January
Public debt hits 31.7% of GDP at end-Jan under ESA95 [36.1% local methodology]
1. Bank Loan Quality
Overdue payments on bank loans up 22.6% y/y to EUR 5.3bn.
2. Loans and Deposits
Bank loans up 10% y/y at end-March 2012
Romanian bank deposits up 16.5% y/y at end-March 2012
3. Monetary Policy
Central bank keeps monetary policy rate unchanged
1. Balance of Payments
C/A gap widens 164% y/y in Jan-Feb 2012
2. Foreign Trade
Exports down 0.4% y/y in February 2012.
FOB trade deficit doubles to 0.5% of GDP in Jan-Feb.
3. External Debt
External public debt up 29% y/y at end-February.
4. Forex Reserves
Forex reserves edge down 0.8% m/m to EUR 34.3bn at end-April.
Table 2: Industrial production (%, y/y
Table 3: Construction Works Volume Index (%, y/y)
Table 4: Retail Sales Volume Index (% y/y)
Table 5: Consumer, Producer Prices (%, y/y)
Table 6: Wages, employment
Table 7: General government budget (RON mn)
Table 8: Public Debt [% of GDP, eop, ESA]
Table 9: Public Debt [eop, local methodology including borrowing from own reserves funds]
Table 10: Aggregate indicators for credit institutions (eop, unless otherwise indicated)
Table 11: Quality of the stock of bank loans (eop, RON mn unless otherwise indicated)
Table 12: Overdue payments (eop)
Table 13: Total bank loans (EUR bn)
Table 14: Stock of bank* loans to private sector (end March 2012)
Table 15: Stock of bank* deposits from private sector (end March 2012)
Table 16: Current Account (EUR mn)
Table 17: Romania CA balance Jan-Feb 2012
Table 18: Foreign trade (EUR mn)
Table 19: External debt (EUR mn)
Fig. 1: GDP, seasonally adjusted (2005=100)
Fig. 2: Industrial production
Fig. 3: Industrial Production, seasonally & 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 & workday adjusted (2005=100)
Fig. 7: Construction Works Volume Index, incl. 12-month average % y/y
Fig. 8: Retail Sales Index, workday & seasonally adjusted (2005=100)
Fig. 9: Retail Sales Volume Index, gross index (2005=100)
Fig. 10: Consumer Price Index (y/y)
Fig. 11: PPI vs. CPI (y/y)
Fig. 12: Unemployment (%)
Fig. 13: Unemployment vs. employment
Fig. 14: Average net wage (2000=100)
Fig. 15: Government balance and debt 2008-2011; Source: Eurostat
Fig. 16: Public debt (EUR mn)
Fig. 17: Net profit vs. provision cost (EUR)
Fig. 18: Bad loans provisions (EUR bn)
Fig. 19: Bad loans (EUR) and NPL ratio
Fig. 20: Overdue, % of total loans
Fig. 21: Stock of credit, by debtor (EUR mn)
Fig. 22: Stock of forex, domestic loans
Fig. 23: Deposits- forex, domestic currency
Fig. 24: C/A deficit in rolling 12M
Fig. 25: Rolling 112M exports (EUR mn)
Fig. 26: FOB exports vs. imports (EUR mn)
Fig. 27: Exports (EUR mn)
Fig. 28: Ext. Debt vs. forex reserves (EUR mn)
Fig. 29: External debt (EUR mn)
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