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Country Report

Romania

February 2011

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ISSN 1356-4102

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Romania

1

Romania

Executive summary

3 Highlights

Outlook for 2011-15

4

Political outlook

6

Economic policy outlook

9

Economic forecast

Monthly review: February 2011

12

The political scene

14

Economic policy

17

Economic performance

Data and charts

19

Annual data and forecast

20

Quarterly data

21

Monthly data

23

Annual trends charts

24

Monthly trends charts

25

Comparative economic indicators

Country snapshot

26 Basic data

27 Political structure

Editors:

Joan Hoey (editor); Matteo Napolitano (consulting editor)

Editorial closing date:

February 10th 2011

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Romania

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Romania

3

Executive summary

Highlights

February 2011

Outlook for 2011-15

Monthly review

The government, comprising the Democratic Liberal Party (DLP) and the Hungarian Union of Democrats in Romania (HUDR), is likely to face further challenges to its rule until the election in 2012. An early election is possible.

The formation of a three-party opposition alliance to contest the next election increases the likelihood of a more stable, majority government in 2012-15.

Continuing austerity measures in 2011 will increase popular dissatisfaction with the government and the risk of social unrest cannot be discounted.

A new, two-year agreement with the IMF will commit the authorities to reforming the public sector, improving absorption of EU funds and improving the business environment by reducing red tape and bureaucracy.

The IMF will allow a consolidated budget deficit equivalent to 4.4% of GDP in 2011, but this must be narrowed to 3% of GDP by 2012. The Economist Intelligence Unit expects these targets to be missed, but not by a great margin.

We estimate a contraction in real GDP of 2% in 2010. We forecast that positive growth, of 1%, will return in 2011 and will average 4.5% per year thereafter.

After shrinking to the equivalent of about 4.6% in 2010, the current-account deficit is expected to stabilise at 5% of GDP in 2011-15.

In December 2010 the government managed to pass all the legislation necessary for completion of the sixth review of the stand-by agreement with the IMF and the release of the seventh loan tranche.

In January 2011 the opposition National Liberal Party (NLP) and Conservative Party (CP) formed the Centre-Right Alliance (ACD). In February the ACD and the Social Democratic Party (SDP) created the Social Liberal Union (USL).

The public finances improved in the fourth quarter of 2010, after the tightening of the governmentís austerity programme, and the full-year budget deficit came in below target, at the equivalent of 6.8% of GDP.

The National Bank of Romania (NBR, the central bank) kept the monetary policy rate unchanged at 6.25% in January and February, as inflationary pressures persist.

Data on retail sales, industrial output and construction for October-November provided few indications that economic recovery was under way in the fourth quarter.

The current-account deficit rose year on year in 2010 in euro terms, to Ä5.2bn (US$7.2bn), but declined in US dollar terms.

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Outlook for 2011-15

Political outlook

Political stability

In December 2010 the minority coalition government led by Emil Boc of the Democratic Liberal Party (DLP), supported by the Hungarian Union of Democrats in Romania (HUDR), passed the legislation on pensions and public- sector wages required by the 2009-11 stand-by agreement with the IMF. This was achieved largely through provoking no-confidence votes, thus avoiding debate in parliament. Although this removed the most immediate threat to the survival of the government, it spurred the two main opposition parties to forge a formal alliance with the aim of ousting the government.

In

January 2011 the National Liberal Party (NLP) formed an alliance with the

Conservative Party (CP)ówhich was originally allied to the Social Democratic Party (SDP)ócalled the Centre-Right Alliance (ACD). The governing bodies of the ACD and the SDP then voted in February to create a formal alliance, the Social Liberal Union (USL), which is intended to last until at least 2016. This

move makes the combined parties the largest single unit within parliament, but leaves them without an overall majority. The opposition parties are urging the HUDR to leave the coalition and join them, which would give the opposition a working majority. However, a decision on this is unlikely to occur before the election of a new leader of the HUDR in March.

There is a high risk of political instability in Romania in the early part of the forecast period, but the prospects for stability may improve under a majority government in 2013-15. The coalition government does not have a majority in parliament and depends on the support of non-aligned members and representatives of minorities f0r survival. The government is deeply unpopular with the electorate, as a result of its austerity policies, with its standing in opinion polls at record low levels. There have been numerous public protests and strikes against the austerity programme, and a repeat of the sort of violent public protests that occurred in the 1990s cannot be ruled out. The formation of the USL means that a majority government is likely after the 2012 parliamentary election, but that government will nevertheless be made up of at least three separate parties with different ideological outlooks and clashing personalities. As long as the opposition parties are united by the objective of removing the DLP from office, conflict among them

is

likely to be suppressed, but if they gain power in 2012, the scope for intra-

government conflict will be considerable.

Election watch

A

parliamentary election is scheduled for late 2012, followed by a presidential

election in 2014. The formation of the new USL alliance, which has the support of about 60% of the electorate, will result in the three constituent parties proposing a single candidate in most constituencies, which should be sufficient to secure an overall majority. It is expected that the head of the SDP, Victor Ponta, will be nominated as prospective prime minister and the head of the ACD, Crin Antonescu, as the presidential candidate. Mr Ponta has stated his

Romania

5

intention of taking action to suspend or impeach the president, Traian Basescu, if he does not co-operate with a USL government. It is also possible, particularly if the HUDR left the government, that the USL could form a government before the scheduled election in 2012.

Mr Basescu will be unable to stand for a further term of office in 2014, assuming that he survives attempts to remove him. The DLP is unpopular and has no obvious candidate to succeed Mr Basescu, who has been promoting the case of the foreign minister, Teodor Baconschi.

International relations

Romania's main foreign policy priority for 2011 is to join the visa-free Schengen area. This is being thwarted by opposition from France in particular, which has waged a diplomatic campaign to persuade others, including Germany, to block membership for both Romania and Bulgaria. In January the French minister for European affairs, Laurent Wauquiez, declared that Romanian and Bulgarian membership of the Schengen area would threaten EU security because of doubts about their ability to manage their borders. Thomas de MaiziËre, the German interior minister, stated that Romanian and Bulgarian membership would be premature because of corruption, organised crime and failings in their judicial systems.

Regardless of Romania's many shortcomings on these issues, making a link between Schengen membership and fulfilment of reforms required under the co-operation and verification mechanism to deny Romania entry is tantamount to changing the criteria on entry conditions. Accession to the Schengen area is a process meant to be governed by strict technical criteria, but subject to a political decision by all Schengen member states. All Schengen inspection missions to Romania have confirmed that the country fulfils the technical criteria (Bulgaria has yet to do so). Romania has spent large sumsó around Ä1bn (US$1.3bn)ósecuring its borders, and the mission reports state that the equipment and training of border guards are "state of the art".

Hungary, which assumed the EU presidency in January 2011, says that Schengen membership for Romania and Bulgaria is a priority. However, with France and Germany objecting, membership will almost certainly be delayed. There is a chance that Romania and Bulgaria could both join in October, especially if Romania receives a favourable co-operation and verification mechanism report from the European Commission in February.

The Schengen dispute has brought home the painful reality to Romania that it does not yet enjoy full EU membership, as confirmed by the co-operation and verification mechanism arrangement. Romania and other smaller EU states are also chafing at the prospect of increased Franco-German dominance over some EU decisions. So far, Romania has refrained from joining groupings of other member states that aim to represent the interests of the smaller members, but that may change as tensions inside the EU increase. These tensions are likely to come to the fore in future debates over the EU budget, structural and cohesion funds, and the common agricultural policy (CAP).

In 2011-15 Romania will proceed with plans to host components of NATO's anti- ballistic missile defence system. The equipment will consist of ground

6

Romania

interceptors. Although Romania is not expected to host radar equipment, SM-3 missiles to intercept incoming ballistic missiles could be launched from Romanian territory. Work on installation will start in 2011 and the programme will become operational in 2015. The move may aggravate Romania's already difficult relations with Russia, despite Mr Basescu's insistence that hosting components of the shield is not a measure directed against Russia, but one aimed at protecting Romania from "other threats".

Economic policy outlook

Policy trends

At the beginning of February the IMF announced a staff level agreement with Romania on a new, SDR3.1bn (US$4.5bn) precautionary stand-by arrangement and on the seventh and final review of the 2009-11 stand-by arrangement, subject to approval by the IMF board in late March. The new stand-by arrangement will be in conjunction with precautionary support from the EU of Ä1.4bn, and a loan from the World Bank of Ä400m (US$500m). The authorities plan to treat the agreement as precautionary and will not draw funds provided under the stand-by arrangement.

The new agreement will concentrate on policies that promote growth and employment, while maintaining the fiscal consolidation that was the primary aim of the outgoing stand-by arrangement. The main challenge will be to reform the debt-ridden public sector, with the emphasis on capping and reducing the arrears of the largest state-owned enterprises (SOEs). By restructuring the transport and energy SOEs, the authorities hope to encourage private investment in the sector and to turn these companies into engines of growth rather than a drain on the economy. There will also be a concerted effort to improve the absorption of EU funds. Efforts to cut bureaucracy and red tape, and to improve the regulatory environment, aim to improve business conditions for domestic and foreign investors. The government intends to carry out its long-awaited plans to sell minority stakes held by the state in several utilities, with the sale of a 9.84% stake in oil giant OMV Petrom expected to happen in April 2011, in order to finance infrastructure investment.

The Economist Intelligence Unit expects that a USL government would probably try to negotiate larger budget deficits with the IMF, and might try to secure credits from China and Russia to lessen dependence on the IMF. Although the flat-rate income tax would probably be preserved, a USL government may try to reduce the level of cuts to public-sector employment and welfare payments.

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7

The new IMF agreement

An even greater ask

The announcement on February 8th 2011 of an agreement on a new, two-year, precautionary stand-by arrangement between the IMF and the Romanian authorities holds out the prospect of concerted action to reform Romania's debt-ridden and inefficient public sector. For 21 years, successive governments have failed to make a serious effort to reform the sector, in the face of strong political and bureaucratic resistance. Despite the personal commitment of the prime minister, Emil Boc, to these reforms, his weak and unpopular government is unlikely to have any more stomach for the fight than its predecessors, with an election in prospect in less than two years. This will be the ninth agreement between Romania and the IMF since the start of the post-communist transition. Of the eight previous arrangements, only two, in 2003 and in 2011, were completedóboth in line with the Economist Intelligence Unit's predictions. Despite the history of truculent relations between Romania and the IMF, the eighth agreement was expected to last, if only because the price of failure in the midst of a global crisis would have been high. On February 8th 2011 the IMF staff mission signed off on the seventh and final review of the 2009-11 stand-by arrangement, subject to approval by the executive board, saying that it had succeeded in ensuring macro-economic and financial stability in difficult circumstances. What are the chances of the ninth agreement lasting the full, 24-month course? That the agreement was reached, despite domestic misgivings about Romania's dependence on the Fund, suggests that the government is keen to have external backing for reform. It also wants to reassure the international financial markets, which continue to assign higher risk ratings to the former communist countries of the Balkans than to other emerging markets. Despite a strong political commitment to the new agreement at prime ministerial level, implementing the programme will be difficult. This is because the planned reform of the public sector will strike at the heart of the system of political patronage in Romania and will thus meet strong resistance. In particular, plans to cap managerial salaries, to limit the level of arrears, and to monitor quarterly spending and revenue, are likely to be opposed. We thus assess the risk of a breakdown in the ninth agreement to be high, especially as the governing parties will be preparing for a general election in 2012.

A sober macro-economic outlook

The IMFís assessment of macroeconomic performance continues to be subject to significant uncertainties. The Fund expects that growth will reach 1.5% in 2011, following an estimated contraction of 1.9% in 2010. Domestic demand is expected to be sluggish in 2011, following falls in public-sector wages and the increase in value-added tax (VAT), but improving domestic demand, alongside strong export growth, is set to be the main driver of growth from 2012 onwards. In 2012-15 real GDP is forecast to grow faster than the 3-3.5% growth in potential output, closing the gap between actual and potential output.

IMF forecasts of economic performance

(% of GDP unless otherwise indicated)

 

2009

2010

2011

2012

2013

2014

2015

GDP (% change, year on year)

-7.1

-1.9

1.5

4.4

4.2

4.2

4.2

Current-account balance

-4.2

-5.1

-5.5

-5.9

-5.5

-5.3

-5.2

External debt

69.2

78.7

81.6

74.4

66.3

58.7

51.1

General government revenue

31.8

32.6

32.9

33.1

32.7

31.8

31.2

General government expenditure

39.2

39.4

37.3

36.1

35.2

33.7

32.7

General government balance

-7.4

-6.8

-4.4

-3.0

-2.5

-1.9

-1.5

Public sector debt Foreign-currency-denominated

28.2

33.9

36.2

35.9

35.1

33.8

31.9

15.2

20.1

23.8

21.4

17.7

14.3

10.7

Source: IMF sixth and seventh reviews under the stand-by arrangement, January-February 2011.

 

Year-end inflation is expected to fall from 8% in 2010 towards the target, set by the National Bank of Romania (NBR, the central bank), of 3% (±1%) during 2011. However, upside risksóincluding the impact of rising world food and energy prices, and downward pressure on the leuóoutweigh downside inflation risks. The central bank is not expected to resume monetary easing until there are clear signs that inflation risks are fully under control. After the seventh review, the Fund said that it expected the current-account deficit to contract from 5.5% of GDP in 2010 to around 5% in 2011-12, slightly below its forecasts at the time of the sixth review, around the long-term norm of 5.2%.

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Fiscal policies and public finance

Fiscal policies and public finance The IMF expects that the impact of the fiscal policies introduced
The IMF expects that the impact of the fiscal policies introduced in 2010óincluding cuts to

The IMF expects that the impact of the fiscal policies introduced in 2010óincluding cuts to public-sector wages and employment, the freezing pensions, the expansion of healthcare contributions to certain pensioners and the elimination of heating subsidiesówill reduce the fiscal deficit to 4.4% of GDP in 2011, with the structural deficit falling below 2% of GDP, from 9% in 2009. However, the IMF admits that there will be severe problems of implementation. General government revenue is not forecast to grow substantially over the period and the burden of fiscal adjustment will be borne by cuts in public expenditure, which is targeted to fall from 39.2% of GDP in 2009 to 32.7% of GDP in 2015. Public-sector debt is forecast to peak at 36.2% of GDP in 2011 and to fall as a proportion of GDP, to 31.9% in 2015. The IMF expects Romaniaís capacity to repay Fund credits to be strong. Outstanding credits peaked at 36% of reserves in 2010. Payments will peak at 11.7% and 12% of gross reserves in 2013-14. Total external debt is expected to peak at 81.6% of GDP in 2011, but will fall to more manageable proportions as economic growth takes hold in 2012-15.

Fiscal Fiscal policy policy

The government's crisis measures contributed to an improvement in public- sector finances in the second half of 2010, mainly as a result of increased value- added tax (VAT) revenue. Cuts in public-sector wages were largely offset by increased expenditure on social security, but cuts in public-sector investment helped. Parliament approved the 2011 austerity budget in December and also approved reforms to public-sector wages, which should help to restrict expenditure. The government plans to reduce the consolidated budget deficit from 4.4% of GDP in 2011 to 3% in 2012 and to 2.5% in 2013, but these targets are predicated on ambitious growth forecasts and improved receipts from the EU.

Public-sector wages will be cut from the equivalent of 8.3% of GDP in 2010 to 6.6% in 2013. The government will also take steps to improve revenue collection and to widen the tax base. We expect the consolidated government budget to record deficits slightly exceeding these targets in 2011-13, but, barring a collapse in policy, we expect the deficit to shrink to 2.6% of GDP in 2015, aided by increased budget finance from the EU. A longer-term concern is that the recession in 2009-10 drove employees out of the formal economy into the grey economy and family employment, where tax collection is lowóa trend that may be hard to reverse as the economy recovers.

Monetary policy

The National Bank of Romania (NBR, the central bank) operates an inflation- targeting regime with a year-end target of 3% for 2011 and 2012 (±1 percentage point). It has established multi-annual targets of 2.5% (±1 percentage point) for 2013 onwards. The NBR expects year-end inflation to fall from 8% in 2010 to 3.4% in 2011, dropping below 3% in 2012, provided that fiscal consolidation continues. Consequently, we do not expect further reductions in interest rates in the short term. The NBR reduced its monetary policy rate by 175 basis points in January-May 2010, to 6.25%, but has since left the rate unchanged because of concerns about the continuation of inflationary pressures. However, we expect the NBR to relax its monetary policy in 2012-15 as inflation falls. Romania is likely to delay adoption of the euro, scheduled for 2015, by one or two years as it struggles to meet the convergence criteria.

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9

Economic forecast

International assumptions

2010

2011

2012

2013

2014

2015

 

Economic growth (%) US GDP Euro area GDP EU27 GDP World GDP World trade

2.8

2.7

2.2

2.4

2.5

2.4

1.7

1.5

1.3

1.5

1.8

2.1

1.9

1.6

1.6

1.7

1.8

1.9

3.8

3.0

3.0

3.1

3.1

3.1

12.4

6.4

6.3

6.7

6.7

6.0

Inflation indicators (% unless otherwise indicated)

 

US CPI Euro area CPI EU27 CPI Manufactures (measured in US$) Oil (Brent; US$/b) Non-oil commodities (measured in US$)

1.6

1.2

2.0

2.5

2.8

2.8

1.4

1.2

1.5

1.6

1.7

1.9

1.8

1.8

1.8

1.9

2.0

2.1

3.2

0.8

0.1

1.8

1.2

1.8

79.6

90.0

82.3

78.3

75.5

76.0

24.0

13.9

-6.2

-4.9

1.1

0.0

Financial variables US$ 3-month commercial paper rate (av; %) Ä 3-month rate US$:Ä (av) Lei:US$ (av) Lei:Ä (av)

0.2

0.3

0.7

2.2

4.1

5.1

0.8

1.0

1.5

2.8

3.5

3.5

1.33

1.25

1.20

1.18

1.16

1.17

3.18

3.30

3.34

3.34

3.32

3.28

4.21

4.13

4.01

3.94

3.85

3.84

Economic growth

Romania was one of the last EU economies to enter recession, with quarter-on- quarter growth turning negative only in the third quarter of 2008. It will also be one of the last EU economies to exit recession and make a sustained recovery. Real GDP fell by 7.1% year on year in 2009 and is estimated to have contracted by a further 2% in 2010. Real GDP fell by 2.3% year on year in the first three quarters of 2010 (adjusted for seasonality and the number of working days), after falling by 0.7% quarter on quarter in July-September and by 2.2% year on year. Aggregate demand in the first three quarters was entirely sustained by stockbuilding, whereas all other components of aggregate demand declined. Quarter-on-quarter growth is expected to have been flat, at best, in October-December.

We expect the economy to return to growth of around 1% in 2011, but the recovery will lag behind most of the EU. We forecast an acceleration in 2012, to 4.4% real GDP growth, and expect economic expansion to average 5.2% per year in 2013-15. The growth of gross fixed capital formation and planned infrastructure investment should stimulate a recovery in the depressed construction sector, but prospects for a recovery in the housing market are not good. Although domestic demand will be hampered by progressive fiscal tightening, which will also dampen government spending over the forecast period, we consider that these growth targets are attainable, particularly if Romania improves its absorption of available EU funding. Improved absorption capacity would contribute to essential investment in infrastructure, which would improve export potential. With the exception of 2011-12, we forecast slightly faster growth rates than those predicted by the IMF, with growth back to Romania's long-term potential of around 5% in 2013-15. In the short run, however, demand in the country's main EU export markets will remain weak,

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implying modest annual expansions in the trade deficit (in absolute terms), which will be financed by improved absorption of EU funding.

Economic growth

%

2010 a

2011 b

2012 b

2013 b

2014 b

2015 b

GDP

-2.0

1.0

4.4

4.9

5.1

5.5

Private consumption

-1.7

1.6

4.9

5.4

6.1

6.5

Government consumption

-2.0

-1.0

2.0

2.3

2.0

2.0

Gross fixed investment

-14.0

7.0

8.0

8.0

10.0

12.0

Exports of goods & services

19.7

14.0

9.9

9.4

9.0

12.2

Imports of goods & services

15.6

11.1

9.2

9.7

10.1

13.1

Domestic demand

-0.7

1.5

5.0

6.0

6.8

7.7

Agriculture

-4.5

3.0

2.0

2.0

3.0

4.0

Industry

-3.0

5.0

7.0

8.0

6.0

5.0

Services

-0.5

-2.1

3.1

3.2

5.0

6.4

 

a Economist Intelligence Unit estimates. b Economist Intelligence Unit forecasts.

Inflation

We forecast a slowdown in inflation in 2011-15, but do not expect it to fall to west European levels within the forecast period. Year-end inflation reached 8% in 2010, following price increases of 5.1% in the second half of the year, with food prices rising by 5.7% over the same period, putting further pressure on household budgets and leading to calls for compensating wage increases. The annual average rate of inflation for 2010 was 6.1%. Provided that fiscal and incomes policies remain tight in 2011 and that wage growth is curtailed, inflation should fall to around 3.5% by the end of the year, inside the central bank's target band. We expect inflation to come down gradually thereafter, dropping to 2.4% by December 2015, as Romania strives to meet the conditions for entry into the EU's exchange-rate mechanism (ERM2).

Exchange rates

The leu fell to a low of Lei4.37:Ä1 (Lei3.56:US$1) at the end of June 2010, indicating the fragility of confidence in the local currency, but appreciated against both currencies in the second half. The leu fell by 1.2% against the euro and by 8.8% against the US dollar in 2010 to reach Lei4.28:Ä1 and Lei3.20:US$1 on December 31st, averaging Lei3.18:US$1 and Lei4.21:Ä1 over the year as a whole. The central bank intervened to offset downward pressure on the leu in late November, as the crisis in Ireland intensified. The currency could remain vulnerable to a loss of investor confidence if the government failed to carry through IMF-mandated fiscal policy reforms, or if there was a contagion effect as a result of a renewed crisis in the weaker euro zone states. The leu is expected to appreciate in real terms against a trade-weighted basket of currencies in 2011-15, in line with productivity differentials.

External sector

The current-account deficit increased by 5% year on year in euro terms in 2010, to Ä5.2bn from Ä4.9bn, but shrank in US dollar terms to an estimated US$7.2bn (equivalent to an estimated 4.6% of GDP) as a result of currency movements. Export growth outpaced import growth, and the merchandise trade deficit in shrank from Ä6.9bn in the year-earlier period to Ä5.9bn. The surplus on current transfers fell from Ä4.2bn to Ä3.4bn. The deficit is forecast to stabilise at around 5% of GDP in 2011-15, as the surplus on current transfers improves as a result of increased current inflows from the EU and workers' remittances. The deficit on

Romania

11

incomes is forecast to expand as profits on foreign direct investment (FDI) improve, and the services deficit will also rise. Net FDI inflows fell by about 25% year on year in 2010 to Ä2.6bn, and covered 50.3% of the current-account deficit. We forecast a gradual recovery in FDI receipts from 2011, as economic growth and confidence return.

Forecast summary

(% unless otherwise indicated)

 

2010 a

2011 b

2012 b

2013 b

2014 b

2015 b

Real GDP growth

-2.0

1.0

4.4

4.9

5.1

5.5

Industrial production growth

5.5

5.0

6.0

7.0

5.0

4.0

Gross agricultural production growth

-4.5

3.0

2.0

2.0

3.0

4.0

Unemployment rate (end-period)

6.9

7.2

6.7

6.4

6.2

5.8

Consumer price inflation (av; national measure)

6.1 c

5.1

3.4

3.3

2.9

2.5

Consumer price inflation (end-period; national measure)

8.0 c

3.5

3.1

3.0

2.6

2.4

Consumer price inflation (av; EU harmonised measure)

6.1

5.1

3.4

3.3

2.9

2.5

Commercial bank lending rate

14.1

13.0

10.0

8.0

6.0

7.0

Consolidated budget balance (% of GDP)

-6.8

-4.8

-3.5

-3.3

-3.0

-2.6

Exports of goods fob (US$ bn)

49.9

56.6

62.0

69.4

77.6

90.7

Imports of goods fob (US$ bn)

57.8

64.1

69.3

77.1

86.3

101.5

Current-account balance (US$ bn)

-7.2

-7.8

-8.3

-9.8

-10.6

-12.4

Current-account balance (% of GDP)

-4.6

-4.9

-4.8

-5.1

-5.0

-5.2

External debt (end-period; US$ bn)

120.1

123.4

126.6

129.8

130.6

135.6

Exchange rate Lei:US$ (av)

3.18 c

3.30

3.34

3.34

3.32

3.28

Exchange rate Lei:US$ (end-period)

3.20 c

3.28

3.29

3.28

3.27

3.22

Exchange rate Lei:Ä (av)

4.21

4.13

4.01

3.94

3.85

3.84

Exchange rate Lei:Ä (end-period)

4.28

3.94

3.91

3.84

3.81

3.79

a Economist Intelligence Unit estimates. b Economist Intelligence Unit forecasts. c Actual.

12

Romania

Monthly review: February 2011

The political scene

The government implements important legislation

In the final days of 2010, parliament enacted the remaining legislation required to comply with the governmentís obligations under its IMF stand-by arrangement. The parliamentary debate on public-sector wages for 2011 was adjourned when a man, described as a technician working for the public-sector TV company, TVR, jumped from a balcony during the opening speech by the prime minister, Emil Boc, protesting at cuts in public-sector wages. The opposition parties refused to return to the chamber after the incident and the legislation was passed by default. The president, Traian Basescu, completed the statutory requirements to implement legislation already approved by parliament, largely by means of calling votes of confidence, after the Constitutional Court had rejected opposition arguments that the laws were unconstitutional. The main elements of the new legislation are listed below.

The laws on the state budget for 2011 allow for a consolidated budget deficit of 4.4% of GDP.

A law on public-sector wages in 2011 allows for cuts of 25%ówhich came into force in the second half of 2010óto continue in 2011. It also allows for growth in public-sector wages of 16% in 2011 from the lower base (a cut of 13% from pre-July 2010 levels).

A law on the unitary salary scheme for public-sector employees creates a single salary spine for all public-sector employees.

A law stipulates that new regulations approved in 2010, which tighten the provision of credit by financial institutions, did not apply retrospectively to existing credit agreements.

A law that consolidates all state pensions into a single system, based on multiples of a basic pension point, was adopted in mid-December.

The education law comes into effect

On January 4th Mr Basescu also signed a law on education, after it had been approved by the Constitutional Court. The law is politically significant, not only because it allows the teaching of some school subjects in minority languages, but because its passage was essential to maintain the presence of the Hungarian Union of Democrats in Romania (HUDR) in the governing coalition. The law also entails significant changes to the governance of both schools and universities, providing for greater participation by parents and local bodies. The legislation provides universities with greater autonomy and creates a three-tier system of universities: "teaching only" universities; teaching and research universities; and teaching and advanced research universities.

Opposition parties form a new alliance

The opposition National Liberal Party (NLP) and the Conservative Party (PC) created a new group, the Centre-Right Alliance (ACD), on January 10th. On January 24th, the anniversary of the unification of Romanian principalities, Victor Ponta, the leader of the Social Democratic Party (SDP), and Crin

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13

Antonescu, the leader of the ACD, announced that the standing bodies of the two parties would vote on a formal alliance on February 5th. Agreement was reached on such an alliance, which will put forward joint candidates for forthcoming local and parliamentary elections, and for some mayoral elections. The purpose of the move is to oust the DLP government, either before or after the parliamentary election scheduled for the end of 2012.

The new opposition alliance

Preparing for power

The governing bodies of the two leading opposition parties, the Social Democratic Party (SDP) and the newly created Centre-Right Alliance (ACD), consisting of the National Liberal Party (NLP) and the Conservative Party (CP), decided on February 5th to create a formal alliance, the Social Liberal Union (USL), which will last until at least 2016. The USL, which is now the largest grouping in parliament, with 45% of the seats, will propose joint candidates in the forthcoming local and parliamentary elections. In principle, candidates for parliamentary seats will be split equally between the two groups, although there may be some latitude to allow the most popular local candidate to stand. The USL will propose a single candidate for the presidency. This is expected to be Crin Antonescu, who currently leads opinion polls, with the support of 39% of the electorate. The leader of the SDP, Victor Ponta, is expected to be nominated as prime minister. The SDP and the ACD are urging the Hungarian Union of Democrats in Romania (HUDR) to leave the governing coalition and join the opposition. Although the HUDR has expressed reluctance to do this, the fact that the USL could win enough seats in the 2012 parliamentary election to form a majority government may force the HUDR to give the proposal careful consideration. The defection of the HUDR from the government would give the opposition parties 52% of the seats in the combined chambers of parliament, which would be sufficient to defeat the government in a vote of confidence and to suspend the president, provided that nearly all members of the three opposition parties supported the motion. The potential strength of the opposition vote could be sufficient to deter the government from trying to enact controversial legislation by provoking votes of confidence. It could also attract support for the opposition from the non-aligned members of parliament (MPs), who have been reluctant to vote against the government in the past. Mr Ponta has indicated that, as the USL will be the largest grouping in parliament, the president, Traian Basescu, would be constitutionally obliged to ask it to form a government, and that parliament could vote to suspend him if he refused. Mr Ponta has also spoken about a vote to impeach Mr Basescu if he failed to co-operate with the alliance, were it to win the 2012 parliamentary election. Such a vote would require a two-thirds majority of the combined chambers to be successful. In principle, joint candidates for parliamentary elections should result in a substantial victory for the alliance, with support for the SDP running at 38% and for the NLP at 22%, according to recent opinion polls. Consequently, the alliance could be expected to gain more than 50% support in a large number of constituencies and to win a large number of remaining seats by proportional representation. However, long-standing animosities remain between the two parties at a local level and it is not certain that voters will obediently support a nominee from the other party. In particular, the new ACD alliance can no longer be described as a traditional liberal party and NLP voters may find it difficult to support an SDP candidate. The creation of the USL has led to some unrest in both the parties at national and local level. Leading figures in the SDP have attacked the principle of equity in the distribution of seats, arguing that the SDP is the larger party and should receive an allocation of seats proportional to its electoral support. Unless the SDP is allocated a larger number of winnable seats, it may not even retain its current proportion of 30% of parliamentary seats. Several leading figures in the NLP opposed the alliance with the CP and feel that the link-up with the SDP is a betrayal of liberal principles, designed mainly to win the presidency for Mr Antonescu.

Opposition to Romania joining the Schengen area intensifies

Romaniaís prospects of joining the Schengen area, which eliminates border controls between participating states, are diminishing in the face of strong opposition from France and Germany, supported by other members, including Finland and the Netherlands. Membership of the Schengen area (to which the

14

Romania

eight former communist countries that acceded to the EU in 2004 were admitted in 2007) is Romaniaís leading foreign policy objective for 2011. Romania and Bulgaria were initially scheduled to join in March 2011, but their accession has been delayed by opposition, led at the highest level by France, which has lobbied other member states to support its stance, and which began a campaign to block entry for Romania and Bulgaria in December 2010.

In January 2011 the French minister for European affairs, Laurent Wauquiez, requested more time to assess technical evaluation reports for Romanian and Bulgarian entry, further slowing the accession process. Romanian officials expressed their concern that Mr Wauquiez has not requested further information directly from them. The Ministry of Foreign Affairs invited him to pay an official visit to assess Romaniaís ability to implement Schengen regulations, which include strengthening border controls against non-member states, particularly at the border with Moldova. Mr Wauquiez has argued that Romania and Bulgaria are responsible for high levels of illegal immigration and trafficking in arms, drugs and children.

Mr Wauquiez was joined by the Finnish minister for European affairs, Astrid Thors, in a press conference on January 20th, at which it was stated that Romanian and Bulgarian membership of the Schengen area would threaten European security. The German interior minister, Thomas de MaiziËre, stated on the same day that Romanian and Bulgarian membership would be premature, not on technical grounds, but because of the levels of corruption, organised crime and failings of the judicial system, which have been repeatedly criticised in EU reports under the co-operation and verification mechanism. Germany and France have argued that sensitive Schengen data should not be made available to Romania before these problems have been resolved.

Hungary, which holds the EU presidency until end-June, has stated that Romania has met the technical requirements for entry (Bulgaria still has problems relating to border controls with Turkey) and on that basis should be allowed to join. The European Peopleís Party (EPP) in the European Parliament has asked that the evaluation reports, which indicate that Romania has met all technical requirements of membership, be declassified to allow the European Parliament to analyse them. As the timetable for entry slips, however, it seems that Romania is unlikely to join until later in 2011 at the earliest.

Economic policy

The IMF releases seventh tranche of stand-by agreement

The IMF released the seventh tranche of the stand-by arrangement, worth SDR769m (US$1.2bn) on January 11th, after the IMF board completed its sixth review of Romania's economic performance under the agreement. The IMF board approved waivers regarding the failure to observe the end-2010 target for government arrears to the private sector and the year-end inflation target. The IMF observed that policy implementation under the programme remained strong, but expressed concern at the slow progress in eliminating domestic arrears. The report released in January noted that progress in privatisation and eliminating losses of state-owned enterprises (SOEs) was limited, and that absorption of EU funding lagged behind other EU countries. The IMF also

Romania

15

indicated that bold reforms to the healthcare system are critical to the progress of fiscal consolidation and eliminating government arrears to the private sector. In addition, the World Bank approved the release of the second Ä300m (US$475m) instalment of its Ä1bn (US$1.3bn) development programme loan (DPL), which is part of the Ä19.5bn multilateral credit agreement. It is expected that the final Ä400m instalment will now be released as part of a new agreement, following payment delays caused by the failure to meet programme targets.

IMF, World Bank and EU missions arrived in the capital, Bucharest, on January 25th for the seventh review of the stand-by arrangement and to negotiate a new agreement to replace the current one, which expires at the end of April. On February 8th the Fund announced a staff-level deal on a new two-year agreement, linked to further progress in structural reforms, which will run beyond the next parliamentary election. The agreement will focus on raising the efficiency of large, loss-making SOEs, with a view to eventual privatisation. The mission also reached agreement on the seventh and final review, paving the way for the release of the eighth and final disbursement, worth about Ä1bn, under the current agreement. However, the authorities have said that they do not intend to draw on the funds. Total disbursements under the current stand- by arrangement amount to SDR10.6bn (US$16.1bn).

The budget deficit falls to 6.51% of GDP in 2010

Data from the Ministry of Finance indicate that the budget deficit fell to Lei33.3bn (US$10bn) in 2010, equivalent to 6.51% of officially estimated annual GDP (or 6.8% on the basis of the Economist Intelligence Unit's estimate of GDP), compared with 7.4% in 2009. Revenue grew by 7.2% year on year, to Lei168.6bn, equivalent to 33% of GDP, and expenditure rose by 4.2% year on year, to Lei201.9bn, equivalent to 39.5% of GDP.

Consolidated budget, 2010

 

2009

2010

Lei bn

% GDP

Lei bn

% GDP

% growth

Revenue Value-added tax (VAT) Insurance contributions Receipts from EU Income & profits taxes Excise duties

157.2

32.0

168.6

33.0

7.2

34.3

7.0

39.2

7.7

14.3

47.9

9.7

45.7

8.9

-4.6

1.9

0.4

5.4

1.1

181.5

30.6

6.2

28.9

5.7

-5.4

15.6

3.2

17.4

3.4

11.5

Expenditure Personnel Goods & services Social assistance Interest Capital investment

193.7

39.4

201.9

39.5

4.2

46.8

9.5

42.8

8.4

-8.6

28.3

5.8

29.8

5.8

5.2

64.0

13.0

68.6

13.4

7.3

6.1

1.2

7.3

1.4

20.0

21.9

4.6

19.4

3.8

-11.7

Balance

-36.4

-7.4

-33.3

-6.51

-

Source: Ministry of Finance.

The main factors contributing to the growth of revenue were receipts of value- added tax (VAT), which grew by 14.3% to count for 7.7% of GDP, and receipts from the EU, which grew from 0.4% of GDP in 2009 to 1.1% of GDP in 2010. However, the recession meant that revenue from social insurance contributions

16

Romania

fell by 4.6%, from 9.7% of GDP in 2009 to 8.9% in 2010, and revenue from incomes and profits taxes fell by 5.4%, from 6.2% of GDP to 5.7%.

Public-sector wage costs fell by 8.6%, to 8.4% of GDP, compared with 9.5% in 2009, and capital investment was cut by 11.7%, to 3.8% of GDP in 2010, compared with 4.6% in 2009. However, social insurance payments rose by 7.3%, from 13% of GDP in 2009 to 13.4% in 2010. Interest payments also rose, from 1.2% of GDP in 2009 to 1.4%.

Monetary policy remained tight in 2010

The National Bank of Romania (NBR, the central bank) left its monetary policy rate unchanged at 6.25% at its meetings in January and February 2011. The monetary policy rate has now been unchanged since May 2010. The NBR estimates that year-end inflation, which reached 8% in 2010, will fall to 3.4% by end-2011 as the impact of an increase of 5 percentage points in VAT, which took place in July 2010, falls out of the system. However, the NBR is concerned that rising global food and oil prices, in combination with the second-order effects of the VAT increase, could heighten inflationary expectations, and it warned of the need to maintain a prudent monetary policy stance.

Consumer price inflation (% change, year on year) 8.5 8.0 7.5 7.0 6.5 6.0 5.5
Consumer price inflation
(% change, year on year)
8.5
8.0
7.5
7.0
6.5
6.0
5.5
5.0
4.5
4.0
Jan
Mar
May
Jul
Sep
Nov
Jan
Mar
May
Jul
Sep
Nov
2009
10
Source: Economist Intelligence Unit.

Broad money (M3) grew by 6.9% in 2010, roughly in line with the estimated growth in nominal GDP, to Lei202.8bn, with intermediate money (M2) growing by 6.2% and narrow money (M1) by 2.8%. Credit growth was also modest in 2010, although loans to the corporate sector grew substantially faster than those to households, with banks concentrating on credits denominated in foreign currencies and deposits denominated in leu.

Lending to the private sector grew by 4.7% in 2010 (a fall of 3% in real terms) to Lei209.3bn (equivalent to 41% of GDP). Credits denominated in foreign currencies grew by 9.8% in leu terms, while credits denominated in leu fell by 3%. Loans to households grew by 1.9% to Lei100.2bn, and loans to the corporate sector by 7.6% to Lei107bn. Loans to the corporate sector denominated in foreign currencies grew by 11.9% to Lei65.8bn, equivalent to 12.8% of GDP.

Deposits of non-government resident customers grew by 5.8% to Lei177.4bn, resulting in a reduction in the loans-to-deposits ratio to 118% at the end of 2010, from 119% at the end of 2009. Deposits denominated in leu grew by 10.8% to Lei113.5bn, accounting for 64% of the total. As a result, the ratio of credits to

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17

deposits denominated in foreign currency grew from 185% at end-2009 to 206% at end-2010, with credits exceeding deposits by Lei68bn. Loans to the corporate sector denominated in foreign currency exceeded deposits by Lei41.6bn.

Monetary aggregates, Dec 2010

 

Lei bn

% change

% GDP

Broad money (M3)

202.8

6.9

39.6

Non-government credits In leu In foreign exchange To household sector To corporate sector

209.3

4.7

40.9

77.4

-3.0

15.1

131.9

9.8

25.8

102.1

1.9

19.9

107.2

7.6

20.9

Deposits of non-government residents In leu In foreign exchange

177.4

5.8

34.7

113.5

10.8

22.2

63.9

-1.7

12.5

By

household sector

104

6.9

20.3

By corporate sector

73.4

4.4

14.3

Source: National Bank of Romania.

Economic performance

There are few signs of recovery in the fourth quarter

Data on retail sales, industrial output and construction for November provided few indications that the economy was undergoing recovery in the fourth quarter. Although registered unemployment continued to fall in November and December, this was accompanied by further falls in the number of registered employees. Retail sales (excluding sales of cars and motorbikes, and adjusted for seasonality and the number of working days) fell by 1.3% month on month in November (following a fall of 3.5% in October) and by 7.6% year on year. Retail sales (adjusted) fell by 5.3% year on year in January-November. Sales of non-food goods (adjusted) fell by 1.7% month on month in November (following a monthly fall of 4.6% in October) and by 14.6% year on year. They declined by 8% in January-November. Sales of food goods, alcohol and tobacco rose by 2.8% month on month (adjusted) in November, but fell by 5.5% year on year, and by 7.3% in January-November. Petrol sales fell by 2.7% month on month in November (adjusted), but rose by 6.8% year on year; they rose by 3.8% year on year in January-November.

Sales and repairs of cars and motorbikes, and paid services to the population, both rose for the fourth consecutive month on an adjusted basis in November. Sales and repairs of cars and motorbikes (adjusted) rose by 5.5% month on month and by 8.8% year on year in November, but fell by 9.2% in January-November 2010. Paid services to the population rose by 1.6% month on month, by 19.1% year on year in November and by 12.5% in January-November.

Industrial output, adjusted for seasonality and the number of working days, grew by 1.6% month on month, by 4% year on year in November and by 3.8% year on year in January-November. Manufacturing output rose by 2.1% month on month in November and by and by 4.6% year on year in January-November. However, construction (adjusted for seasonality and the number of working days) continued to decline in November, falling by 4.6% month on month and

18

Romania

by 18.9% year on year, taking the annual fall in construction in January- November to 15.1%.

Wages rise for the first time in eight months in November

The average net wage grew by 2.2% month on month in November 2010 (the first monthly increase since March), to Lei1,377 (US$417), and by 0.8% year on year, equivalent to a fall in real wages of 6.4%. The average net wage in November was 8.7% below its peak in March 2010. Consumer prices rose by 5.1% between March and November.

Public-sector wages clawed back some of their losses following cuts of more than 20% in July 2010, with average wages in November rising by 5.2% month on month in education, by 2.4% in administration and by 1.2% in sanitation. It is not clear how much this is the result of job losses among lower-paid personnel, who have been most affected by reductions in public-sector employment. Nevertheless, average wages in education were 16.5% below their June level, in administration by 17.1% and in sanitation by 17.4%.

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19

Data and charts

Annual data and forecast

 

Pl ea se

se e

g ra p hi c

b el ow

2006 a

2007 a

2008 a

2009 a

2010 b

2011 c

2012 c

GDP Nominal GDP (US$ bn) Nominal GDP (Lei bn) Real GDP growth (%)

 

122.7

170.6

204.3

161.1

154.8

160.3

174.1

345

416

515

491

492

529

582

7.9

6.0

7.1

-7.1

-2.0

1.0

4.4

Expenditure on GDP (% real change) Private consumption Government consumption Gross fixed investment Exports of goods & services Imports of goods & services

 

11.4

10.2

8.4

-9.2

-1.7

1.6

4.9

3.5

7.4

3.7

1.2

-2.0

-1.0

2.0

19.3

28.9

19.3

-25.3

-14.0

7.0

8.0

10.6

8.7

19.4

-5.5

19.7

14.0

9.9

22.4

26.1

17.5

-20.5

15.6

11.1

9.2

Origin of GDP (% real change) Agriculture Industry Services

 

3.3

-16.9

21.4

-0.4

-4.5

3.0

2.0

10.0

10.6

7.1

-6.9

-3.0

5.0

7.0

7.7

9.4

4.6

-7.6

-0.5

-2.1

3.1

Population and income Population (m) GDP per head (US$ at PPP) Recorded unemployment (av; %)

 

21.5

21.5

21.5

21.5 b

21.4

21.4

21.4

10,485

11,462

12,556

11,781 b

11,614

11,916

12,731

5.2

4.1

4.4

7.8

6.9

7.2

6.7

Fiscal indicators (% of GDP) General government revenue d General government expenditure General government balance Net public debt

 

31.0

30.6

32.0

31.9

34.3

33.6

33.5

32.7

32.8

36.7

39.3

41.0

38.4

37.0

-1.6

-2.3

-4.8

-7.4

-6.8

-4.8

-3.5

15.4

17.5

19.5

28.2

34.3

36.9

35.8

Prices and financial indicators Exchange rate Lei:US$ (av) Exchange rate Lei:Ä (av) Consumer prices (av; %) Stock of money M1 (% change) Stock of money M2 (% change) Lending interest rate (av; %)

 

2.81

2.44

2.52

3.05

3.18 a

3.30

3.34

3.53

3.34

3.70

4.25

4.21 a

4.13

4.01

6.6

4.8

7.8

5.6

6.1 a

5.1

3.4

44.3

64.0

15.8

-14.2

2.8 a

-17.6

11.4

27.9

34.0

17.3

8.3

6.2 a

10.5

8.8

14.0

13.3

15.1

17.3

14.1

13.0

10.0

Current account (US$ m) Trade balance Goods: exports fob Goods: imports fob Services balance Income balance Current transfers balance Current-account balance

 

-14,836

-24,566

-28,182

-9,482

-7,894

-7,544

-7,315

32,336

40,555

49,760

40,713

49,915

56,600

61,995

-47,172

-65,121

-77,942

-50,195

-57,809

-64,144

-69,309

5

530

951

-497

-998

-702

-666

-4,079

-5,662

-5,372

-2,968

-2,634

-3,965

-5,099

6,125

6,618

8,884

5,649

4,338

4,397

4,777

-12,785

-23,080

-23,719

-7,298

-7,187

-7,814

-8,303

External debt (US$ m) Debt stock Debt service paid Principal repayments

 

53,939

84,033

104,943

111,368 b

120,058

123,357

126,551

8,648

11,565

18,585

16,702 b

15,775

15,762

15,918

6,472

8,325

14,475

11,966 b

12,795

12,873

12,945

International reserves (US$ m) Total international reserves

30,211

39,956

39,468

44,107

48,075

49,732

53,674

a Actual. b Economist Intelligence Unit estimates. c Economist Intelligence Unit forecasts. d Consolidated government budget, including local and social security budgets.

Source: IMF, International Financial Statistics.

20

Romania

Quarterly data

 

Pl ea se

se e

g ra p hi c

b el ow

2009

2010

 

1 Qtr

2 Qtr

3 Qtr

4 Qtr

1 Qtr

2 Qtr

3 Qtr

4 Qtr

General government finance (Lei bn; cumulative) Revenue Expenditure Balance

 

38.1

39.2

38.5

40.9

37.5

39.7

43.2

48.2

46.0

45.7

49.7

51.7

45.8

49.5

48.4

58.2

-7.9

-6.5

-11.2

-10.8

-8.2

-9.9

-5.3

-10.0

Output Index of industrial production (2000=100) Index of industrial production (% change, year on year)

 

108.5

118.1

118.8

122.3

113.2

126.2

124.1

130.0

-13.0

-8.2

-4.3

4.0

4.3

6.8

4.5

6.3

Employment, wages & prices Employment, state sector (end-period; ë000) Employment, state sector (% change, year on year) Unemployment rate (end-period; % of the labour force) Average gross wages (Lei per month) Average gross wages (% change, year on year) Consumer prices (2000=100) Consumer prices (% change, year on year) Producer prices (2000=100) Producer prices (% change, year on year)

4,724

4,618

4,505

4,368

4,303

4,264

4,194

n/a

-1.6

-4.3

-6.8

-7.8

-8.9

-7.7

-6.9

n/a

5.6

6.0

6.9

7.8

8.4

7.5

7.4

6.9

1,875

1,891

1,869

1,923

1,994

1,962

1,853

1,938

17.1

9.2

6.8

1.9

6.3

3.8

-0.8

0.8

125.9

127.1

127.2

128.7

131.7

132.7

136.8

138.8

6.8

6.1

5.0

4.6

4.6

4.4

7.5

7.9

141.0

141.7

142.5

143.8

146.0

150.3

152.7

n/a

5.8

1.7

-1.3

1.8

3.5

6.1

7.2

n/a

Financial indicators Exchange rate Lei:US$ (av) Exchange rate Lei:US$ (end-period)

 

3.28

3.08

2.95

2.89

2.97

3.29

3.30

3.15

3.19

2.98

2.86

2.94

3.04

3.56

3.13

3.20

NBR reference rate (%; end-period)

10.2

9.9

9.0

8.2

7.6

6.6

6.3

6.3

M1

(end-period; Lei

bn) a

81.46

81.71

80.58

79.36

76.46

80.50

81.50

81.60

M1 (% change, year on year)

 

-1.4

-10.1

-13.0

-14.2

-6.1

-1.5

1.1

2.8

M2

(end-period; Lei

bn) a

174.88

179.48

182.53

188.01

187.82

192.28

192.59

199.59

M2 (% change, year on year)

 

15.2

11.2

10.0

8.3

7.4

7.1

5.5

6.2

Sectoral trends

Manufacturing index (2000=100)

 

110.1

125.5

124.5

126.4

114.6

134.7

130.8

135.5

Manufacturing

index (% change, year on year)

 

-15.2

-8.8

-5.4

4.2

4.1

7.3

5.1

7.2

Mining index (2000=100) Mining index (% change, year on year)

 

91.6

81.8

90.1

91.2

80.2

77.1

86.0

87.0

-1.8

-17.5

-15.2

-12.5

-12.4

-5.7

-4.6

-4.6

Foreign trade (US$ m) Exports fob Imports cif Trade balance

 

8,577

9,573

10,889

11,635

10,913

11,761

12,514

14,144

11,460

12,918

14,435

15,659

13,737

15,361

15,255

17,482

-2,883

-3,345

-3,547

-4,024

-2,824

-3,601

-2,740

-3,338

Balance of payments (US$ m) Merchandise trade balance fob-fob Services balance Income balance Net transfer payments Current account balance Reserves excl gold (end-period)

 

-2,010

-2,344

-2,407

-2,721

-1,672

-2,302

n/a

n/a

-77

-37

-170

-213

-387

-173

n/a

n/a

-680

-927

-628

-733

-733

-954

n/a

n/a

1,574

1,234

1,669

1,172

625

788

n/a

n/a

-1,193

-2,074

-1,536

-2,495

-2,167

-2,641

n/a

n/a

33,393

37,370

41,565

40,757

43,133

38,790

44,483

43,361

a From January 2007 the National Bank of Romania has redefined monetary aggregates in compliance with European Central Bank methodology. M1 and M2 data since January 2007 are not consistent with the earlier series.

Sources: National Bank of Romania; National Commission for Statistics, Monthly Statistical Bulletin; IMF, International Financial Statistics.

Romania

21

Monthly data

 

Jan

Feb

Pl ea se

se e

Mar

g ra p hi c

b el ow

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Exchange rate Lei:US$ (av)

 

2009 3.20

3.35

3.29

 

3.18

3.06

3.00

2.99

2.96

2.91

2.89

2.87

2.90

2010 2.90

3.01

3.01

3.08

3.32

3.47

3.34

3.28

3.26

3.08

3.14

3.24

2011 3.19

n/a

n/a

 

n/a

n/a

n/a

n/a

n/a

n/a

n/a

n/a

n/a

Exchange rate Lei:Ä (av)

 

2009 4.23

4.28

4.28

 

4.20

4.17

4.21

4.22

4.22

4.24

4.28

4.29

4.22

2010 4.14

4.12

4.09

 

4.13

4.17

4.24

4.26

4.24

4.26

4.28

4.29

4.29

2011 4.26

n/a

n/a

 

n/a

n/a

n/a

n/a

n/a

n/a

n/a

n/a

n/a

Real effective exchange-rate index (CPI-based; 1997=100)

 

2009 149.31

149.04

150.99

 

153.69

154.63

153.67

152.97

152.05

152.66

151.96

152.45

154.00

2010 158.25

157.82

158.31

156.39

153.20

150.34

153.99

154.81

154.46

155.94

155.33

n/a

2011 n/a

n/a

n/a

 

n/a

n/a

n/a

n/a

n/a

n/a

n/a

n/a

n/a

Budget revenue (Lei bn)

 

2009 15.1

10.9

12.1

 

15.2

12.0

12.0

15.0

11.0

12.5

15.4

12.2

13.3

2010 14.0

11.2

12.3

15.1

11.6

13.0

16.1

12.9

14.1

16.5

13.7

18.1

2011 n/a

n/a

n/a

 

n/a

n/a

n/a

n/a

n/a

n/a

n/a

n/a

n/a

Budget expenditure (Lei bn)

 

2009 13.4

15.9

16.7

 

16.6

14.0

15.1

18.2

15.8

15.7

15.3

16.5