Weekly Financial Focus - February 3
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3 February 2012 |
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BANCA COMERCIALĂ ROMÂNĂ S.A. |
Address
Bulevardul Regina Elisabeta, Nr. 5
Bucureşti, Sector 3
Phone
+40-21-314.91.90
+40-21-312.61.85
Fax
+40-21-310.02.46
+40-21-311.18.19
Website
www.bcr.ro
Macro and real economy – highlights
Romania backs new European fiscal compact
All EU members except for the UK and Czech Republic last Monday supported a new framework aimed at consolidating budget discipline. President Basescu said that non-euro countries will be accepted for participation in all summits where key topics on competitiveness or the Eurozone strategy are discussed. He added that the conclusion of negotiations at the European Council on the ‘agreement on strengthening fiscal discipline and convergence’ was a real success. Romania will have a respite of almost two years (to the end of 2013) in which to bring itsconstitution in line with the requirements of the new European fiscal framework, although the interlude could be shorter if the treaty were ratified sooner (before January 1, 2013) by twelve Eurozone member states.
This is good news for Romania inasmuch as elections are just around the corner and it is most likely that a new socialist cabinet will take office in late 2012. The new legislation will help Romania avoid fiscal slippages and will make the country more consistent in applying budget policies, especially at a point when new cabinets of a different color are appointed. However, it is pretty unlikely that the constitution will be amended at least until the general elections later this year, whether these be early or term elections, as the current center-right coalition in power cannot produce the required quorum (2/3 of the seats in the parliament) to revise the fundamental laws of the country, although the socialist-liberal opposition has verbally agreed to support the new European fiscal compact.
Prime Minister Boc: ‘Economic growth top priority in 2012’
In a recent interview, Prime Minister Boc dismissed rumors of a cabinet reshuffle or his resignation and said that the government has certain objectives to achieve. PM Boc was quoted as saying that the top priorit remains supporting economic growth in 2012 and that there are several growth drivers, such as the EUR 6bn due from European Funds, the RON 32bn public investments, as well as cutting down on para-fiscal taxation.
He also explained that there could be some wage and pension hikes later this year but declined to elaborate further on this. He simply stated that wage/pension growth will be implemented only if the country sees stable economic growth and the cabinet will not commit to raising salaries/pensions without anything solid to rely on. The prime minister also said that, starting February 7, a company could be established in only three days as part of a program aiming at reducing red tape.
On Tuesday, during a special meeting with the prime minister, several MPs from the Democrat-Liberal Party (PDL) voiced dissatisfaction about the lack of transparency in the PM’s running of the party. They said the party needs clear rules to go by, rather than hackneyed phrases wheeled out over and over again that do no good for the Democrat-Liberal Party. To dispel any speculation by the local media, several democrat-liberals said after the meeting that they had not asked the prime minister to resign from office.
With the elections approaching, politics are also heating up within the main ruling coalition party (PDL). A significant drop in polls to around 15% after two years of tough austerity and fiscal consolidation is weighing on the spirits of the current democrat-liberals MPs, along with the prospect of not getting a new mandate in the Romanian parliament. However, a possible reshuffle of the incumbent cabinet or even the appointment of a new technocrat cabinet is more likely to be carried out after the IMF/EU review mission currently underway comes to an end (February 6, 2012).
Opposition likely to go on strike but remain on payroll
The president of the National Liberal Party said earlier this week that MPs from the opposition will go on parliamentary strike in an attempt to put additional pressure on the ruling coalition to organize early elections. It seems that activity in the senate will be pretty much blocked, as most commissions will fail to meet the quorum in the absence of the opposition. However, it seems that there are several technical issues, and one of them is pay during the strike. According to some parliamentary officials, there is a pretty good chance of the opposition receiving pay and other incidentalbenefits while on strike, due to flaws in the relevant parliamentary regulations. The opposition can voluntarily choose to pay back their wages and other extras to the state budget, but this seems pretty unlikely, considering the past behavior of the Romanian parliament.
On the other hand, the leader of the ethnic Hungarians minority (UDMR), Kelemen Hunor, a key member of the ruling coalition, seems to be sitting on the fence and said they would not speculate on early elections or election merger until the constitutional court provides a rationale behind their decision to strike down the law on the election merger. There are voices inside UDMR advocating early elections for fear that the Hungarian Civic Party, a new contender eyeing the Hungarian electorate, might score precious points off UDMR.
Retail sales spiked m/m in December 2011
As expected, retail sales soared by more than 10% m/m in December (gross figure), putting the annual rate of growth at 6%. The rebound of retail sales was driven mainly by increased demand during the holiday season. Consumer confidence improved somewhat in December (unadjusted terms) and the trend seems to also have held in January, when the reading came in even better. Good results in December helped retail sales tip over into positive territory for the first time in the last twelve quarters. However, they remained negative for the whole year 2011, falling 2.5% y/y.
Higher wages in December following bonuses paid by employers may also have stood behind the positive trend in retail sales, while the flurry of discounts, granted especially by big retailers, also boosted demand for certain goods. Local managers expected a moderate decline in retail sales during January-March 2012, while prices are likely to strengthen, which will bring the monthly rates under pressure.
