Intellinews Romania Country Report

Intellinews Romania Country Report

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. Summary
The replacement of the cabinet of PM Emil Boc with a new one, based on the same parliamentary majority, took place smoothly in January putting an end to the political turmoil that reached a climax and the street protests threatened the political stability. Further social unrest might resume in the coming months, but the elections should help dissipate the tensions and help the new cabinet of Mihai-Razvan Ungureanu survive successfully by the end of its short term. http://www.bharatbook.com/market-research-reports/romania-market-research-report/intellinews-romania-country-report.html Romania will hold local and parliamentary elections this year under adverse external economic circumstances. The outlook does not seem encouraging and actually the country’s growth projections were downgraded significantly over the past couple of months by IFIs and independent analysts amid bleaker expectations. From 2.5% GDP in 2011, the country’s GDP growth would most likely ease to below 1% this year. The prospect for more prosperous expansion was postponed until after the European sovereign debt crisis reaches an end. The agreement with the EC, IMF and WB provides certain predictability and guarantees reasonable pace of reforms in key areas, particularly in the state owned companies. The government’s room of manoeuvre under the given circumstances is however limited and this will predictably lead to frequent delays and adjustments in the calendar of reforms. Nonetheless, the IFIs and the IMF in particular were rather flexible in accommodating such constraints during the current two-year agreement that was initiated last spring. business research The exports already show signs of fatigue while the financing of the real sector fails to resume at satisfactory level in spite of the central bank’s rhetoric and interest rate cuts. Furthermore, the third growth driver, namely the absorption of EU funds reached another deadlock when the EC interrupted the intermediary payments under one of the major cohesion programme. It is essential for the country to improve the absorption of EU funds this year and particularly in 2013 after it performed very poor over the past five years. The exporters’ performance deteriorated abruptly in December, when exports actually shrank by nearly 1% on the year, entering a negative territory for a first time since November 2009. This apparently confirms concerns related to weaker demand in the EU area and its impact on the new member states. The corporate lending keeps improving slightly, but the real sector managers complain about lack of reasonable financing resources and excessive collaterals. The banks visibly prefer financing the government. The Treasury drained twice more money than it planned for January, while the yields decreased belo6%. To this contributed the central bank’s three interest rate cuts of 25bps each that brought the monetary policy interest rate to 5.5%. The central bank upped the yearend inflation forecast to 3.2% y/y but in the meanwhile the disinflation exceeded expectations in January when the CPI index inched up by only 2.7% y/y. The banking system’s situation has improved marginally in Q4 last year, but this might be only temporary if the real sector faces problems again. NPL ratio eases by 13bps q/q to 14.05% at end of 2011 and banks’ provision costs shrink to before-crisis level in Q4 2011. We estimated a EUR 103mn net aggregate profit for the banking system in Q4 and losses of EUR 79mn for whole 2011. This would come on the top of EUR 123mn losses in 2010. Nonetheless, the EUR 200mn of losses
in 2010-2011 are only a small fraction of the profits gained in the years before. Table of Contents
EXECUTIVE SUMMARY 4
FOCUS STORY: New government, same challenges 5
Romania gets new cabinet, with mainly the same agenda; and weaknesses 5
Romania should stick to agreements with IFIs to keep rating safe – Moody’s 5 RELATIONSHIP WITH IFIs 5
Ruling coalition backs EU fiscal consolidation pact 5
IMF confirms Romania’s funding programme remains on track 6
EC to interrupt intermediary payments under human resource programmes in Romani 6
Romania’s EU funds absorption hits 63% of 2007-2013 allocations – minister 6 For more information kindly visit :
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