2.58% inflation in July 2010

According to the data published by the National Statistics Institute the inflation was of 2.58% in July 2010, as compared to the previous month.

7.43% unemployment at the end of July 2010

According to the data published by the National Employment Agency (www.anofm.ro), the unemployment rate was of 7.43% at the end of June 2010, as compared to 7.44% unemployment rate registered in the previous month and to 6.3% in July 2009. Total number of the unemployed people was of 679,495.

GDP in the second quarter of 2010

First estimation of the National Statistics Institute show that in the second quarter of 2010, in real terms, the Romanian GDP was 0.3% as against the first quarter of 2010. As compared to the second quarter of 2009, the GDP registered a decrease of 

Central bank keeps key interest rate at 6.25 pct

ROMANIAN ECONOMIC HIGHLIGHTS, July 5, 2010. The Board of Directors of the National Bank of Romania (BNR) decided on June 30 to keep the monetary policy interest rate at 6.25 percent per annum. According to a BNR release, other decisions reached by the National Bank Board are aimed at ensuring a firm management of liquidity in the banking system, as well as at maintaining current levels of reserve requirement ratios applicable to credit institutions’ liabilities in local lei and in foreign currency. Against the background of the decision to maintain the monetary policy interest rate at 6.25 percent per annum, the central bank announced that it would closely monitor domestic and international economic evolutions, so as to achieve and maintain, by the adequate use of instruments at its disposal, the medium-term stability of prices.

BNR forex reserves drop by 1.13 pct

On June 30, the National Bank of Romania’s (BNR) international forex reserves stood at 31.627 billion euros, marking a drop by 1.13 percent as compared to 31.989 billion euros in the previous month, a BNR press release informs. According to the release, Romania’s international reserves (foreign exchange plus gold) at the end of June amounted to 34.999 billion euros, by 0.71 percent less against 35.251 billion euros on May 31, 2010. In June, the financial operations under the inflows amounted to 792 million euros, comprising inflows in the Ministry of Public Finances' accounts, changes in the minimum foreign exchange reserves set up by the credit institutions, inflows into the European Commission account, incomes from the management of international reserves and other. The total outflows amounted to 1.154 billion euros, representing changes in the minimum foreign exchange reserves set up by the credit institutions, installment and interest payments associated to the direct and state-guaranteed public external debt and others.

The gold stock remained steady at 103.7 tons, and given the evolutions of the international prices of gold, its value amounted to 3.372 billion euros. BNR informs that due payments in July 2010 in the account of the direct or Ministry of Finance-guaranteed public external debt amount to 876 million euros.

0.16% inflation in June 2010

According to the data published by the National Statistics Institute the inflation was 0.16% in June 2010, as compared to the previous month.

According to the data published by the National Employment Agency (www.anofm.ro), the unemployment rate was of 7.44% at the end of June 2010, 0.23% lower as compared to the previous month and 1.44% higher than in June 2009. Total number of the unemployed people was of 680,782.

Agerpres, Romanian Economic Highlights, June 28. The VAT increase by five percentage points from 19 to 24 percent, effective as of July 1, is expected to bring a supplementary RON 3.5 - 4 billion to the state budget by the end of this year, Minister of Public Finance Sebastian Vladescu declared on June 26 at the Victoria Palace of Government. This measure is set forth in the emergency ordinance amending the Tax Code, initially approved by the government on June 23, but discussed again on June 26. According to the cited official, the extra RON 3.5-4 billion is necessary to close the year with a budget deficit of 6.8 percent of GDP, and rising social security contributions or taxing pensions are not yet being contemplated. Vladescu said that the VAT increase will ensure the necessary stability and financing, but the initial measures proposed by the government were best for Romania and should have been implemented. “I cannot hide my deep disappointment that today we are putting up the VAT. In no case do we consider this measure is best for Romania at this moment. We had conceived a program of surgical minuteness, whereby we would have operated right where the problem was, at the site of excesses, where Romania's budget had gone astray, but we were not allowed to use it. Rather than adjusting the budget in the areas where it was unsustainable in the long term, where costs had bloated absolutely irrationally – in two years by 55 percent for salaries and 75 percent for pensions - instead of doing this, which belongs to the government’s competence, we saw this capacity taken away from us. A measure (the VAT increase) that affects everybody, including those we were hoping to see recovering in 2010 and 2011, is a measure we never wanted," said Vladescu. He mentioned that during talks with international bodies one month and a half ago, dozens of scenarios had been considered to keep the budget deficit in rein and that the measures initially agreed upon were the really good ones. The projection for this year’s GDP and inflation rate will also have to be adjusted as a result of this new decision, said Vladescu. The authorities were projecting zero economic growth for this year whereas in May, the National Bank of Romania revised this year’s inflation forecast upwards, from 3.5 to 3.7 percent.

Agerpres, Romanian Economic Highlights, June 28. The government decided to raise the VAT 5 percentage points to 24 pct, starting July 1, Prime Minister Emil Boc declared on June 26, at the end of the government’s extraordinary meeting. "Today, in the government meeting, we were able to approve the final form of the letter to the International Monetary Fund (IMF), which sets forth the VAT increase by five percentage points," said Emil Boc, adding that no other step to increase fiscality was taken. "No other additional measure was adopted, just the VAT increase, no other measure was passed today," said Boc. The VAT hike is actually part of the government’s alternative plan, which is now being activated after Romania's Constitutional Court (CCR) ruled on June 25 against the planned pension cut by 15 pct. The Prime Minister added that the government will move on with the restructuring of the budget-paid apparatus, according to the recently adopted law that provides a 25 pct cut of public sector wages. "With this we have the problem partially solved (...), yet the hardest part further remains the task of the government, which has to carry through the process of restructuring the public sector, carry on with measures aimed at combating tax evasion, prioritizing investments and supporting economic activity and the sped up absorption of EU funds. (...) We will immediately continue with the restructuring of the budget apparatus, as the wage cuts lay the foundation for a lean and efficient public sector, adjusted to Romania’s needs and possibilities,” said Boc. The Prime Minister expressed hopes that Parliament will adopt this week the austerity laws, along with the amendments resulting from the Constitutional Court’s ruling of unconstitutionality. "Parliament is in session, so it can move towards such a decision. (...) We expect that [the laws] are adopted next week and fully enforced," said Boc. He added that the Government seeks the approval of the IMF Board on June 30 for the release of the fifth loan tranche to Romania. "The government’s negotiations with the American and European partners, the World Bank, the European Commission and the International Monetary Fund are in an advanced stage, so that the plan we envisage is negotiated and implemented. (...) The agreement with the IMF goes on and our target is to see on Wednesday [June 30], when the IMF Board convenes in the meeting rescheduled to allow Romania adjust the new provisions to the Constitutional Court ruling, a positive outcome from the IMF and implicitly from the EC, which would maintain Romania’s credibility on the international markets, ensuring the financing of the country’s budget deficit," said Premier Emil Boc.

Agerpres, Romanian Economic Highlights, June 28. The reduction of pensions is unconstitutional because it refers to a past activity, given that the current retirees have paid contributions during their time of employment, judge Ion Predescu of the Constitutional Court of Romania (CCR) declared on June 25. On this day, the Constitutional Court of Romania (CCR) ruled unconstitutional the provisions of the Law on specific measures aimed at restoring the budget balance, which state that the gross pensions and allowances of assistants to 1st degree disability retirees shall be cut by 15 percent; the Court upheld the same for the RON 622.9 pension grade supposed to be used in calculating the gross value of the pensions and allowances. The provisions of the Pensions Law providing the recalculation of the magistrates’ pensions were also found unconstitutional. At the end of the session during which CCR ruled that the cut of pensions by 15% is unconstitutional, judge Ion Predescu argued that wages and allowances can be modified, because they are "active and for the future," whereas pensions are not. In the opinion of the judge, a retiree who has duly paid contributions for over 30 years shouldn’t bear the guilt for the state’s incapability of managing them well. The Constitutional Court of Romania (CCR) on Friday, June 25, ruled that Art. 9 of the Law on specific measures aimed at restoring the budget balance, stating that "(1) Gross pensions and allowances of assistants to 1st degree disability retirees shall be cut by 15 percent from the day the present act takes effect. (2) A pension grade of RON 622.9 shall be used to establish the gross value of the pensions and of the allowances of the assistants to 1st degree disability retirees" is unconstitutional.

Agerpres, Romanian Economic Highlights, June 21. Underground economy accounted in the first quarter of 2010 for some 20.4 percent of Romania's Gross Domestic Product (GDP), on rise from 2009, when it represented 19.8 percent of GDP, according to National Statistics Institute (INS) data. INS evaluations mainly include black market labor and VAT frauds, but not the illegal economy - prostitution, drug traffic, smuggling, as well as profit tax frauds or social security contributions, Adriana Ciuchea, director general of the Direction of National Accounts and Macro-economic Syntheses with INS told Agerpres. She explained that after a minimum level of 14.5 percent of GDP in 2004, when facilities were granted to individual entrepreneurs, succeeding to determine some activities to emerge from the economic grey zone, the underground economy rose year-on-year. In 2008, the underground economy was estimated at 19.6 percent of the GDP. According to INS representative, the institution could launch in 2012 a project through which evaluations could be also made as for the illegal economy, including prostitution and drug traffic. "We asked the Eurostat to provide us a model we can use starting with 2012, so that we can include these categories, as well. We expect to see if financing through European funds will be approved for this project", said Adriana Ciuchea.

Agerpres, Romanian Economic Highlights, June 21. The Government, by an emergency ordinance issued on June 19, decided to slash the spending on goods and services at the Romanian public institutions by 20 percent. Prime Minister Emil Boc said the next day that all the public institutions and authorities will have to operate 20 percent cuts in the spending for fuel, phone bills, travels across the country and abroad, furniture acquisitions in the third and fourth quarters. “There is an exception, namely the payment of the health care services”, the Prime Minister added. The Government also decided that the monthly fuel consumption at the public institutions be cut be 50 percent by year-end. Thus, the monthly consumption of the ministers’ cars will be cut from 400 litres to 200 litres, for the ministries’ vehicles from 300 to 150 litres, for the prefect’s offices from 350 to 175 litres.

Romania's current-account deficit widens 65.5% in Q1 2010

Agerpres, Romanian Economic Highlights, May 25. Romania’s current-account deficit widened 65.5 percent in Q1 2010 from Q1 2009, reaching 1.506 billion euro, according to a press release issued by the National Bank of Romania (BNR) on May 17. The widening is explained as due largely to a 62.8-percent decrease year on year in current transfers surplus. Non-residents’ direct investment in Romania worth 754 million euros (as compared with 1,475 million euros January-March 2009) covered 50.1 percent of the Q1 2010 current account deficit. In the first three months of 2010, out of the total figures, equity stakes (including reinvested earnings) amounted to 650 million euros (as compared with 993 million euros January-March 2009) and intra-group loans to 104 million euros (as compared with 482 million).

The medium- and long-term external debt at end-March 2010 stood at 70,157 million euros (81.5 percent of total external debt), 6.9 percent above the level recorded at end-2009.

Short-term external debt at end-March 2010 totaled 15,877 million euros (18.5 percent of total external debt), up 8.8 percent from end-2009. The medium- and long-term external debt service ratio - computed as a ratio of medium- and long-term external debt service to exports of goods and services - ran at 34.6 percent in the first quarter of 2010, compared with 33.1 percent in 2009. At end-March 2010, goods and services import cover - computed as a ratio of the BNR’s official reserves (foreign exchange + gold) at end of period to average monthly imports of goods and services for the period under review - stood at 9.8 months versus 8.6 months at year-end 2009.

0.15% inflation in May 2010

According to the data published by the National Statistics Institute the inflation was 0.15% in May 2010, as compared to the previous month.

7.67% unemployment at the end of May 2010

According to the data published by the National Employment Agency (www.anofm.ro), the unemployment rate was of 7.67% at the end of May 2010, 0.4% lower as compared to the previous month and 1.87% higher than in May 2009. Total number of the unemployed people was of 701,854.

According to the data published by the National Institute for Statistics, the average net salary was of RON 1,428, decreasing cu RON 8 (-0.6%), as compared to the previous month.

May 9, Press declarations after the meetings with IMF, EC and WB representatives.

PM Emil Boc explained that there are only two options that the Government has at present: one option is offered by IMF and stipulates an increase of the VAT to 24%, and rising the flat tax to 20%; the second option is proposed by the Romanian Government and includes a 25% reduction of the revenues in the public sector (reduction will be made evenly, without taking into consideration the level of the salary), and a 15% reduction of the pensions and other social transfers (without changing the value of the state support for children and for the disabled persons, but including unemployment aid, for example). The Government decided for the second option.

The above mentioned austerity measures will allow for a budget deficit of 6.8% of the GDP in 2010. The value of the deficit was agreed upon with IMF and EC.

The above mentioned austerity measures have to be implemented by June 20, so that by the time the Intention Letter is presented to the IMF board, a significant part of these measures is already implemented. If this happens, Romania will receive the next tranche from IMF by the end of June 2010, while the tranche coming from the EU is going to be received in accordance with the EU internal procedures.

Agerpres, Romanian Economic Highlights, May 10. The National Bank of Romania (BNR) has revised upwards its analyzed inflation forecast (December to December) to 3.7 percent in 2010 and to 2.8 percent in 2011, BNR Governor Mugur Isarescu said on May 6, at the presentation of the quarterly report on inflation. "We estimate a 3.7 percent inflation for 2010 and of 2.8 percent for 2011. In 2009, the projected inflation was 4.7 percent," said Mugur Isarescu. The inflation forecast for 2010 was established initially at 3.5 percent and for 2011, at 2.7 percent.

Bucharest, May 4 /Agerpres/ - In a meeting today, the Administration Board of the National Bank of Romania (BNR) has decided to lower its monetary policy rate to 6.25 percent per annum from 6.5 percent, starting May 5, 2010. It also decided to secure adequate management of liquidity in the banking system, and to maintain the existing levels of minimum reserve requirement ratios on both leu-denominated and foreign currency-denominated liabilities of credit institutions. The Board also examined and approved the Quarterly Inflation Report. "The analysis of developments in the macro-economic indicators field reveals a continued disinflation and an annual upward dynamics of exports, as well as a current account deficit which remains at sustainable levels. At the same time, aggregate demand deficit and the declining annual lending to the private sector both persist. The annual inflation rate dropped to 4.2 percent in March from 4.47 percent in February, coming down within the variation band around the target, mainly due to the favorable trends in food prices against the background of relatively low volatility of the leu exchange rate. The annual adjusted CORE2 inflation slid further, remaining below two percent", says the Board release remitted to AGERPRES. The updated forecast shows a continuation of disinflation, but also a relative heightening of domestic risks related to the fulfillment of fiscal and incomes policy objectives in the public sector and of uncertainties related to developments on external markets amid recent tensions regarding the public finance crisis in Greece. These factors may complicate the recovery prospects for the Romanian economy. In this context, the BNR Board has decided to lower the monetary policy rate to 6.25 percent per annum from 6.5 percent. Consequently, starting May 5, 2010, the rate on the deposit facility will be lowered to 2.25 percent per annum from 2.5 percent and the rate on the lending facility (Lombard) will be 10.25 percent per annum versus 10.5 percent. At the same time, the penalty rate for deficits of leu-denominated minimum reserve requirements will drop to 15.5 percent, starting with the May 24-June 23, 2010, maintenance period.