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Romania Country Report 2015

  • ID: 3288668
  • June 2015
  • Region: Romania
  • 35 Pages
  • Emerging Markets Direct

The report covers info as of June 24.

Romania’s president, Klaus Iohannis, has appointed Gabriel Oprea - currently minister of interior and deputy prime minister - for the position of interim prime minister while Prime Minister Victor Ponta is on medical leave. Ponta extended its medical leave from June 16-19 to three to four weeks but he later decided to return as soon as possible after internal tensions occurred within the ruling coalition.

The political volatility might result in the country abandoning de facto de SBA with the IMF and the BoP assistance programme with the EC - due for completion in September.

Romania’s parliament endorsed on June 24 the revised Fiscal Code - including the controversial lowering of the VAT rate from 24% to 19% and other tax rate cuts. As an effect, the fiscal deficit will widen next year to 2.9% of GDP, said Finance Minister Eugen Teodorovici. But he stressed that the gap would remain below the 3%-of-GDP benchmark and the country would thus avoid the excessive deficit procedures.

Key Points:

- Parliament endorses Fiscal Code, including 19% VAT rate [VAT rate for foodstuff was cut to 9% as of June 1, 2014]

Note: Product cover images may vary from those shown

Robust growth despite political volatility
President Iohannis appoints interim prime minister
Prime Minister under investigation
European Commission, IMF concerned about 5pp cut of VAT rate in Romania
IMF mission expected in Romania in mid-Jul

1. Corporate, structural reforms

2. GDP, forecasts
- Strong private consumption and investments contributed to robust 4.3% y/y Q1 GDP growth in Romania
- Romania’s net investments up 8.5% y/y in Q1
- Romania state forecasting body revises 2015 GDP growth up 0.5pp to 3.3%
- World Bank revises projection on Romania’s 2015 GDP growth to 3%
- Drought expected to hurt Romania’s agriculture sector

3. Industry, Constructions, Retail
- Industrial growth eases to 1.8% y/y in April
- Electricity consumption 3.9% down y/y in Jan-Apr
- Construction works 10.3% up y/y in April
- Retail sales growth accelerates to 7.1% y/y in April

4. Prices, Inflation
- Romania’s headline inflation accelerates to 1.16% y/y in May
- Romania’s industrial prices drop by 2.75% y/y in April

5. Labour Market
- Net wages 6.3% up y/y in April


1. Budget Execution
- General government surplus stands at 0.85% of GDP in Jan-Apr

2. Fiscal Policy
- Parliament endorses Fiscal Code, including 19% VAT rate

3. EU Funds
- Treasury relies on short-term financing as cost of longer-term bonds rise

3. Public Debt
- Romania is ready to launch 1-1.5bn Eurobond, considers two issues this year
- Romania’s public debt up 4.5% y/y, debt-to-GDP ratio stays at 38.4% at end-March


Romania's banking system reports robust 187mn profits in Q1

1. Bank Loan Quality.
- Banks' NPL ratio drops 0.3pp m/m and 7pp y/y, to 13.5% at end-April
- Overdue bank loans decrease by 17%, or 1bn ytd at end-April

- New bank loans issued in Romania up 5.7% y/y, to 3.45bn in Jan-Apr
- Bank loans 3.8% down y/y at end-April, currency substitution loses ground
- Bank deposit base keeps expanding, by 6.3% y/y at end-April

- Price paid by UniCredit for 45% stake in Romanian subsidiary might exceed 1bn
- Romanian bank BCR to sell 2bn NPL bundle within weeks - sources
- Insurance market up 7.4% y/y


1. Balance of Payments
- Romania’s C/A deficit narrows by 92% y/y in Jan-Apr

2. Foreign Trade
- Romania’s exports up 5.5% y/y in April

3. External Debt

4. Forex Reserves
- Central bank foreign exchange reserves up 126mn in May, to 30.1bn

Note: Product cover images may vary from those shown
Note: Product cover images may vary from those shown


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