Weekly Financial Focus - December 9
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9 Decembrie 2011 |
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BANCA COMERCIALĂ ROMÂNĂ S.A. |
Adresa
Bulevardul Regina Elisabeta, Nr. 5
Bucureşti, Sector 3
Telefon
+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
- Agriculture – breath of fresh air for theRomanian economy in 2011
- Industry gradually slowing down
- Retail sales up 2.7 m/m in October
- RON at five-week high
- BSE: Waiting for the EU Summit decisions
News & real economy
Agriculture – breath of fresh air for Romanian economy in 2011
The auspicious weather conditions this year, combined with the country’s high agricultural potential, was a gold mine for the local economy, helping it advance by an estimated 2.3% for the whole of 2011. It is also noteworthy that the strong upward trend in agriculture gave a leg up to private consumption in 3Q11 by means of an increased cottage food industry largely destined for own use. Unfortunately, strong results in agriculture in Romania are more like a flash in the pan, as this sector exhibits a highly volatile production pattern from one year to the next.
The outlook for 2012 is under the spell of the sovereign debt crisis in Eurozone and foreign analysts are now increasingly building their baseline scenarios for the region around ‘zero’ economic growth. For the time being, we stick to our current economic growth forecast of 1.2% for Romania, which seems well calibrated for a stagnationscenario in the Eurozone. Romania has yet to deliver in terms of fiscal consolidation - a sore point on many agendas these days - and this will keep private consumption and GDP ticking over.
Industry improved its performance in 3Q11, helped by both foreign and domestic demand; construction tipped over into positive territory across all three segments; the recovery of the residential segment remains fragile and was mostly due to a strong base effect; trade & services were a shade below zero, impacted by negative retail sales and public services hit by the ongoing fiscal consolidation.
Private consumption finally eased into positive territory for the first time in the last twelve quarters, helped by superb results in agriculture; investments also rebounded, mainly on favorable trends seen in construction, especially in the commercial segment; contrary to our expectation, net exports made a negative contribution to GDP and this could be explained by the recovery of domestic demand in industry, which prevented imports from slowing more rapidly (production of capital goods and intermediary goods rely to a large extent on imports).
Outlook Dec-11: Favorable: metallurgy and metallic construction, mining, food and beverages, electric equipment and energy; Stable: automotives, wood processing, chemical and rubber products and printing and reproduction of recorded media; Negative: construction materials and IT&TV. Insufficient demand continues to bea main drag, especially in IT & TV, reproduction of recorded media, metallurgy and metallic construction, automotives. Financial deadlock has also been cited as an important limiting factor for production by around 15% of total respondents from industry. The most negative expectations from this point of view came from thechemical and rubber industries and electric equipment.
Construction confidence in Romania began to wane in August and the trend continued into November. In October, construction turned negative y/y, and the worsening sentiment in November is likely to affect new orders and contracts; the government has channeled more resources towards big road infrastructure projects, and this helped the engineering segment shift above zero in 3Q11. A striking contrast was lent by the non-residential segment, which grew by 9.6% y/y during January-October, following significant expansion of existing shopping centers doubled by new openings of malls. The residential segment was up 7.6% y/y in October, due mainly to a strong base effect, but also the renewed government backed mortgage scheme.
Retail sales grew almost 3% in October across all three main segments, but in y/y terms they continued to sag by 4% y/y in the first ten months. Increased cottage food production for the own use of households and the pretty extensive coverage of those relying on this type of industry, may provide a partial explanation as to why retail sales of food products remained so low even during the summer, when prices saw a marked decline. However, the wave of new ‘openings’ and price discounts granted lately by big retailers may give a boost to retail volumes in 4Q11 and October confirmed that. It remains to be seen whether the trend will hold in Nov. and Dec.
