Economic Overview - September 2009

9 Octombrie 2009

RAIFFEISEN BANK S.A.

 

Highlights

•  Ruling coalition between the Democratic Liberal Party (PD-L) and the Social Democratic Party (PSD) collapsed on 1 October when all 8 ministers appointed by the PSD resigned from the government. Remaining ministers from PD-L were appointed as interim ministers for the ministries left by PSD. The interim period might go up to 45 days, but the government might collapse even before given that the opposition parties initiated a non-confidence procedure and the government decided to assume responsibility in Parliament on the pension law. Given that PD-L has no majority in Parliament, in case of a non-confidence vote the Government is likely to fall. We expect political instability to remain high in the next period (especially given that presidential election are scheduled on 22 November) and this raises risks for the Stand-by Agreement with the IMF.

•  On 23 September, Romania received the second instalment from the IMF amounting to EUR 1.9 bn.

•  Inflation figures surprised again on the positive side. Consumer prices fell by 0.2% in August from July. Annual rate of inflation stood at 4.95% in August and we expect it to decrease rapidly in the next two quarters.

•  On 29 September, the NBR cut the monetary policy rate by 50 bp to 8%. The move was in line with market expectations. This was the fifth cut in a row since the beginning of the year. We expect more cuts in the next period due to weak economic activity and decreasing inflation rate and we see the monetary policy rate at around 7% by June 2010.

•  Output in construction fell sharply in July (-10.6% mom) and August (-7.9% mom). Better news came only from industrial output and retail sales which are likely to show positive quarterly growth rates in the third quarter.

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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...