Weekly Financial - October 8th

11 Octombrie 2010

BANCA COMERCIALĂ ROMÂNĂ S.A.

 

News

President Basescu sends the Pension Bill back to Parliament

After the Constitutional Court (CCR) greenlighted the Pension Bill on Wednesday, leu started to firm closing at 4.2653 from a previous 4.2825. The CCR decision came to support the public reforms in Romania, especially the reform of the state pension system which is part of the IMF agreement and a keystone for medium and long term budget consolidation. The Parliament adopted the Pension Law just two weeks ago, but opposition challenged it in the CCR warning that they will take immediate action to suspend President Basescu if he approves it once the CCR has said yes on the Law. Procedural issues as the lack of quorum in the Parliament have been invoked by the opposition which once again asked the President to send the Law back to the Parliament for a second review. Under the new law, future pensions will be adjusted for annual inflation and raised by half of the annual growth rate in the average wage in the economy. The law aims to equalize retirement age for both men and women at 65 (for women the retirement age of 65 will be reached in 2030) and eliminate privileged pensions for some professional categories such as policemen, officers in the army, pilots, MP and diplomats. Some analysts had expected the court to reject the reforms, given a previous ruling against pension cuts. Some analysts had expected the CCR to reject the reforms, given a previous ruling against pension cuts in late June.

But the big surprise was to come on Thursday afternoon, when President Basescu announced he would send the Pensions Law to the Parliament motivating that the retirement age of 65 for women is too high and suggested decreasing it to 63. In a first stage, the Law is to be reviewed by each specialized Commission of the two Chambers of the Parliament. The latest President's decision will test the coalition strength, while social-democrats and liberals will continue voting against if the only change to the law is the decrease in the retirement age for women.

Unemployment inched down in September

Unemployment decreased slightly to 7.35% in September, while total number of unemployed people stood at 670.2tsd (-5.5tsd compared to August). Local managers anticipate moderate declines in payrolls in manufacturing, construction and services during September-November and thus registered unemployment could rejoin an upward trend in October when seasonal effects will have gone and the announced job cuts in the public administration will have become effective.

Imports of vegetables 38% higher in 1H10

Romania imported more than 118tsd tones of vegetables (potatoes, tomatoes, onion and garlic) in the first six months of 2010, up by 38% compared to the same period of 2009. Exports, instead, were six times lower standing at only 20.4tsd tonnes data from the Ministry of Agriculture show. Imports of vegetables amounted to EUR 51 million in 1H10, compared to EUR 34 million in the corresponding period of 2009. Despite its huge potential in agriculture, Romania is a heavy net importer of vegetables, with local production covering around 20% of the total needs.

The prices of vegetables advanced by 1.3% m/m in August and there are pretty good chances for this trend to hold, inasmuch as a significant part of the crop was affected by floods, especially potatoes. This could create upside pressures on inflation having in view that vegetables represent more than 3.6% in the consumer basket. Positive news this year came from higher production of wheat and maize, in particular, according to the latest estimates of the Ministry of Agriculture.

 

Real economy

Outlook Oct-10:

Favourable: automotive, electric equipments, metallurgy and metallic construction;

Stable: food industry, chemical industry, rubber and plastic industry, oil processing;

Negative: IT and radio-TV sets;

Main limitation factor in industry: insufficient demand.

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