FOCUSECONOMICS

Romania
Romania

Romania

February 2013

Outlook deteriorates
Economic activity remains depressed, with industrial production
falling 2.2% annually in December, a deterioration from the 0.5% contraction seen in November. On a positive note, the unemployment rate fell from 7.4% in 2011 to 6.5% in 2012, which bodes well for a recovery in private consumption. Meanwhile, on 29 January, the joint EU-IMF mission concluded the last review of Romanias economic program. The mission agreed to allow Romania a threemonth extension in order to meet targets under the EUR 5.0 billion scheme, but urged the government to consolidate its fiscal position and to complete public sector privatizations.

LONG-TERM TRENDS | 3-year averages

Population (million): GDP (EUR bn): GDP per capita (EUR): GDP growth (%): Fiscal Balance (% of GDP): Public Debt (% of GDP) Inflation (%): Current Account (% of GDP): External Debt (% of GDP): 2009-11 21.4 125 5,839 -2.0 -7.0 29.1 5.3 -4.4 72.6 2012-14 21.3 143 6,705 1.4 -2.7 36.8 4.1 -4.1 73.5 2015-17 21.2 180 8,510 3.8 -2.2 35.0 2.9 -5.0 64.9

Consensus Forecast panellists see the economy expanding 1.4%

this year, which is down 0.1 percentage points from last months estimate. In 2014, the panel sees the economy growing 2.5%.

Inflation rose from 4.6% in November to 5.0% in December. At its

5 February meeting, the National Bank of Romania (NBR) left the monetary policy rate unchanged at 5.25%. The panel expects inflation to close the year at 3.8%, and to moderate to 3.5% by 2014.

Joan Enric Domene

Economist

REAL SECTOR | Industrial production shows zero growth in 2012 In December, industrial output fell 2.2% over the same month the year before, which followed the revised 0.5% drop observed in November (previously reported: -1.0% year-on-year). The decline was driven by contractions in the manufacturing and the energy supply sectors. Compared to the previous month, industrial production remained flat in seasonally and working-day adjusted terms, which followed the 0.6% decrease recorded in November. As a result, industrial production tallied zero growth in the full year 2012, which contrasts the 5.8% growth seen in 2011. Consensus Forecast panellists expect industrial production to record full-year growth of 2.0%, which is down 0.1 percentage points from last months figure. Next year, the panel estimates industrial output to increase 4.0%. According to the 2013 budget passed on 7 February, the government expects GDP to expand 1.6% this year, in line with the IMFs latest forecast, before accelerating to 2.2% in 2014. FocusEconomics Consensus Forecast panellists anticipate the economy to grow 1.4% this year, which is down 0.1 percentage points over the previous months projection. For next year, the panel expects the economy to expand 2.5%. MONETARY SECTOR | Inflation exceeds Central Bank target In December, consumer prices rose 0.6% over the previous month, which was well above both the virtually flat reading recorded in November and market expectations of a 0.3% rise. The monthly jump was the result of higher prices

Industrial Production | variation in %

15.0

10.0 % 5.0

0.0 Year-on-year Annual average -5.0 Dec-10 Jun-11 Dec-11 Jun-12 Dec-12

Note: Year-on-year changes and annual average variation of industrial production index in %. Source: National Institute of Statistics.

FocusEconomics Consensus Forecast Eastern Europe

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FOCUSECONOMICS
Inflation | Consumer Price Index
3.0 Month-on-month (left scale) Year-on-year (right scale) 2.0 % 1.0 7.5 % 5.0 10.0

Romania

February 2013

for food and non-food items, which overcompensated for lower prices for services. Annual headline inflation climbed from 4.6% in November to 5.0% in December, above the Central Banks tolerance margin of 3.0% plus/minus 1.0%. The reading exceeded both market expectations of a 4.6% rate and the 3.1% recorded in December 2011. Annual average inflation inched up from 3.2% in November to 3.3% in December. For 2013, the Bank expects inflation to end the year at 3.5% and to slow to 3.2% by the end of 2014. Consensus Forecast panellists see inflation at 3.8% by the end of this year, which is unchanged from last months result. For 2014, panellists anticipate an inflation rate of 3.5%. MONETARY SECTOR | Central Bank keeps rates on hold amid high inflation At its 5 February meeting, the National Bank of Romania (NBR) left the monetary policy rate unchanged at a record-low of 5.25% for a seventh consecutive meeting. The move was widely anticipated by market analysts, as policy makers continue to evaluate the impact of accelerating inflation. The Bank also left its minimum reserve requirements on both leu and foreignexchange deposits unchanged. Regarding inflation developments, the Bank noted that the inflation rate will reach again the upper bound of the target band by the end of the year following a short-lived pick-up in consumer price growth in 2013 H1, mainly as a result of larger administered price adjustments. Against this backdrop, monetary authorities aim at curbing inflation, while simultaneously supporting sustainable economic growth through a recovery in lending to the private sector. Consensus Forecast panellists expect the Central Bank to leave the policy interest rate broadly unchanged this year, resulting in a year-end rate of 5.19%. For 2014, the panel foresees the rate closing the year at 5.10%.

0.0

2.5

-1.0 Dec-10

Jun-11

Dec-11

Jun-12

0.0 Dec-12

Note: Year-on-year and month-on-month variation of consumer price index in %. Source: National Institute of Statistics.

Central Bank Reference Rate | in %

12.0

10.0 % 8.0

6.0

4.0 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13

Note: National Bank of Romania reference rate in %. Source: National Bank of Romania (NBR).

FocusEconomics Consensus Forecast Eastern Europe

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