Economic Overview - January 2010

10 Februarie 2010

RAIFFEISEN BANK S.A.

 

Highlights

• Inflation rate stood at 4.7% yoy at the end of 2009, below the level recorded at the end of 2008 (6.3%). The pace of decline in the annual inflation rate eased in Q4 2009 due to hike in excises for tobacco products, but we expect it to accelerate in the following months. So, even though monthly inflation would be high in January (at around 1%), the annual rate of inflation would start to decrease and we expect it to reach around 3.5% yoy by March. Low levels of CORE 3 suggest that underlying inflationary pressures remain low for the time being, while leu appreciation helps also the disinflation.
• Both industry and exports continue to perform well in November, advancing by 1.7% mom respectively by 2.6% mom. However, domestic demand remains weak. Retail sales fell by 5.7% mom in December, for the fourth month in a row. We are looking to see a slight positive advance in the GDP figure for Q4 2009 (+0.1% qoq).
• On 3 February, the central bank cut the key by 50 bp to 7%. This was the second cut since the beginning of the year.
• Risk aversion of foreign investors for Romania has reduced after political turmoil calmed down and RON assets have become very attractive. As a result, both the interest rates and the bond yields fell sharply since the beginning of the year. The leu appreciated also by around 2.5% against the euro.
• On 14 January, the Parliament approved the budget plan for 2010 in line with the IMF agreement (budget deficit target set at 5.9% of GDP). On 27 January, technical missions from the IMF and the European Commission said that their evaluation of the Romania’s government policies was favourable and they would recommend the release of the next tranches from the external financing package agreed in 2009. Romania is to receive EUR 2.3 bn from the IMF in February and EUR 1 bn from the EC in March.
• On 2 February, Fitch rating agency improved Romania’s rating outlook to “stable” from“negative”. Fitch reaffirmed Romania’s long-term foreign currency rating at “BB+”.

 

Key events of the month

Labour market: adjustment mainly in private sector

Different adjustments took place on the labour market in 2009 in the private and in the public sector. In the private sector, the number of employees decreased sharply, while wages continued to increase slightly. In the public sector, the number of employees was almost flat, while earnings (which include bonuses and other stimulus) decreased.

Source: National Institute of Statistics, Raiffeisen RESEARCH

Note: based on the monthly survey in enterprises with 4 or more employees.

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