RAIFFEISEN BANK S.A.

  |  04.02.2013

Romania Economic Overview

Short-term indicators suggest weak activity was preserved in Q4 2012 and we look for flat dynamics in real GDP. We don’t expect a visible improvement in activity in Q1 2013, while we see more chances for growth to gain momentum in the second half of the year.

Page 1/4
 1 2 3 4   

Highlights

 

  • Short-term indicators suggest weak activity was preserved in Q4 2012 and we look for flat dynamics in real GDP. We don’t expect a visible improvement in activity in Q1 2013, while we see more chances for growth to gain momentum in the second half of the year.

 

  • Annual inflation rate stood at 5% yoy in December last year, fuelled by a large contribution from volatile food prices (1.3 percentage points). Adverse statistical base effect would be preserved in H1 2013, keeping headline annual inflation between 5.4-5.8% yoy. When adjusting for contribution of volatile food prices, advance in consumer prices would remain close to 4% yoy throughout 2013 (even close to 4.5% yoy in H1 2013).

 

  • Central bank remained on hold at the last monetary policy meeting on 7 January (key rate unchanged at 5.25%), but it hinted at easing control over liquidity conditions in the money market. With headline inflation rate at 5.4%-5.8% yoy in H1 2013 and medium-term trend in inflation at 4.0%- 4.5% yoy, we don’t see room for key rate cuts in the coming quarters. But we see more room for central bank to ease liquidity conditions in the market, which means ROBOR rates might fall in the following period.

 

  • Planned inclusion of RON T-bonds in its EM Local bond indexes by JP Morgan boosted interest of foreign players for RON T-bonds. Non-residents might have increased their stake in such assets by at least EUR 2.4 bn equivalent in Dec 2012 and Jan 2013. Yields for T-bonds plunged by 100bp in Dec-Jan. These large inflows of foreign capital also resulted in an appreciation of the leu (+2.7% against the euro during Dec-Jan).

 

  • The final review under the precautionary SBA agreement with the IMF showed Romanian authorities missing quantitative targets and failing to implement structural reforms. Romanian authorities asked for a 3-month extension in order to put some reforms in place.

 

Page 1/4
 1 2 3 4   

COMMENT ON THIS ARTICLE:




Load new captcha.