Romania monthly economic review - May 2009

4 Iunie 2009

ERNST & YOUNG S.R.L.

 

Latest developments

INS: GDP drops by 6.4% in Q1

Romania's Gross domestic product (GDP) dropped by 6.4% in the Q1 of 2009, compared to the same period in 2008, and went down by 2.6 % from the last quarter of 2008, National Institute of Statistics (INS) data say. According to the seasonal adjusted data, GDP increased by 0.3% and 0.4% in the Q2 and Q3 of 2008 when compared to the previous quarter. Romania's GDP diminished by 3.4% in the last quarter of 2008 compared to the Q3. The Romanian Central Bank (BNR) Governor showed optimism about the possibility that Romania should register an economic growth in 2009 as well saying that the deceleration in the economic growth was obvious in the Q1 of 2009, but a year has four quarters and he believes that Romania will have an economic recovery. As a result of the negotiations with the IMF and the EU, the Government altered the public budget on a projected economic decrease by 4% in 2009, after the budget had been initially built based on a 2.5% economic growth. BNR initial projection for Romania's economic growth stood at 2% - 2.3 %.

INS:Q1 trade deficit down 54.8%

Romania’s trade deficit fell 54.8% in the Q1 against the year-earlier period, to RON 8.479 bn, amid a 25.2% drop in imports, a lot lower than the 6.7% decline in exports. Romania’s Q1 exports and imports totaled RON 27.978 bn and RON 36.48 bn respectively, according to the National Institute of Statistics (INS). The Q1 trade deficit accounts for less than half of the RON 18.769 bn in the year-earlier interval. The value of the intra-EU exchange of out-going goods equaled RON 20.99 bn, and incomings, RON 26.89 bn, or 75% of exports and 73.8%, imports namely. Machinery, transport equipment and other manufactured products make up the bulk of exports and imports. March exports matched RON 10.97 bn, and imports, RON 13.39 bn. Compared to March of 2008, the RON value of exports rose 7.8%, and imports fell 25%. Against February, the RON value of exports was up 22.8% in March, and imports, 8.2%. March trade deficit therefore came to RON 2.42 bn, down RON 5.27 bn from the same month a year earlier.

Foreign direct investments in Romania lose 13.9% in Q1

Foreign direct investments (FDI) in Romania dropped during the Q1 by 13.9 % y/y to EUR 1.456 bn, becoming twice as large as the current account deficit, according to the information published by the Central Bank (BNR). In contrast, FDI corresponding to the first 2 months of the year hiked by 38.1%, to EUR 1.374 bn. The investments stood during last year's Q1 at EUR 1.691 bn, covering 42.8% of the current account deficit at the time. Of the FDI recorded this year, the capital participations accounted for 50.8%, the reinvested profit for 9.3% and the intragroup credits for the remaining 39.9%. The loans contracted by companies headquartered in Romania from their mother-companies outside borders have the potential of widening the gap, as they will be returned when maturing. Their weight has nevertheless dropped from last year's 42.8%.In 2008 the current account deficit was covered 53.5% by FDI, which amounted to EUR 9.02 bn, 24.45% up from 2007.

The stock of provisions for bad bank loans rises by 35% in Q1

The stock of provisions for bad loans increased by 35% y/y in Q1 to EUR 2.42 bn at the end of March, as the share of loss-type loans alone surged by 2% to 6.5% of total stock of loans over the period. When expressed in EUR, the stock of provisions increased by EUR 517 mn, which severely hurt the financials of the banking system that reported combined losses of around EUR 50 mn. The stock of provisions compared to the total bank loans increased from 3.9% at the end of last year to 5.3% at the end of March. In annualized terms, the quality of bank loans deteriorated even more. Thus, the share of loss-type loans more than doubled from 3% at the end of March 2008 to 6.5% one year later. Consequently, the stock of provisions more than doubled from EUR 1.1 bn to EUR 2.4 bn. At the same time however, the stock of bank loans increased by only 7% y/y to EUR 46 bn.

Industrial production down 13% in Q1

The industrial production in the Q1 of 2009 dropped by 13%, compared to the same time period of the previous year, based on a press release issued by National Institute of Statistics (INS). The drop in the industrial production, during the first 3 months of 2009, was induced by the decline in processing industry, by 15.2%, in electric and thermal energy, natural gas warm water and conditioner air, by 2.5%, as well as in the extracting industry, which reduced by 1.8%. Declines were registered for all categories of goods within a breakdown by large industrial groups. The intermediary goods industry dropped by 18.7%, the long term use goods, by 18.3%, capital goods industry, by 14.4%, current use goods, by 8.9% and energy by 5%. The industrial production, series adjusted on the basis of number of working days and seasonality, was lower by 11.8% in Q 1 of 2009, compared to Q 1 of 2008, because of the drop in the processing industry, by 15.6% and electric and thermal energy by 2.8%.

1

2

3

The tricky lag LUCIAN CROITORU Adviser to the Governor - BANCA NAŢIONALĂ A ROMÂNIEI Lucian Croitoru, Adviser on monetary policy issues to the National Bank of Romania Governor, talks about the NBR’s next moves and explains why the decrease ofthe policy rate hasn’t been reflected into lower interest rates on bank loans. mai mult... The turnaround CRISTIAN SPORIS Secretar de Stat - MINISTERUL ECONOMIEI ŞI FINANŢELOR Cristian Sporis, Secretary of State at the Ministry of Public Finance, in charge with the national treasury and public debt, explains how the state managed to borrow money at the lowest costs in the last seven years and how it turned from a clear market taker into a player with a strong position on the market. mai mult...