SIMILAR ARTICLES

2018 EU Cohesion Monitor: What should Romania understand between the lines

The Berlin Think Tank European Council of Foreign Relations (ECFR) published the 2018 edition of the EU Cohesion Monitor – an analysis of the cohesion… Mai mult

Winter forecast: CNP radically adjusts economic growth. Observations on game of deficit, exchange rate, inflationv

The National Prognosis Commission (CNP), an institution under the government authority, radically changed the economic growth for 2017, from 6.1% in last autumn forecast to… Mai mult

Average income trap – danger for Romania and CEE states: Setting growth engine on innovation is the only solution          

In the absence of strategies to increase technological levels and raise wages, Central and Eastern Europe (CEE) will remain in the average income trap without… Mai mult

Romania – biggest reduction in energy consumption in EU. Causes, consequences, opportunities

According to the data published by Eurostat, Romania recorded the biggest decline in the gross energy consumption between 1996 and 2016 and the cumulated value… Mai mult

How we stand with the money and on what we spend. A plus of 40% to personal income in four years, a 20% increase in GDP over the same period

The data published by the INS for the third quarter of 2017 show that the total average income of a household reached 3,426 lei per… Mai mult

Romania’s economic stability: warning signals of 2017, as seen from European indicators

de Marin Pana 22.10.2017

Romania is starting to show more and more warning signals for the short-term economic analysis based on Eurostat, with values that are significantly out of a balanced evolution.

Latest data is not likely to calm down potential investors and improve the country’s rating, despite the economic growth that reached 6% in the second quarter.

We mention that Eurostat offers a selection of macroeconomic indicators of the highest interest for the way member countries are seen. These indicators are standardized and harmonized for comparability between countries at the European level (Principal European Economic Indicators – PEEIs).

Here is how Romania’s economy looks from the outside, from the perspective of the centralized analysis at the EU level and what conclusions can be drawn from the recent economic developments:

*

  • Labour costs (%, Q/Q-4)
  • Turnover in services sector (%, Q/Q-4)
  • Employment (Q/Q-1)
  • Vacancy rate (%)
  • Housing prices
  • Current account
  • Unemployment (%)
  • Industrial production (%, Month/Month -12)
  • Construction (%, Month/Month -12)
  • Long-term bond yield (%/year)
  • Euro/RON exchange rate

*

Five observations

1- From the beginning, the sustained increase in labour costs, which is well above the level of the economic advance and keeps accelerating, looks increasingly worrying. It is noteworthy that the average presented in the European statistics does not discern an even more pronounced phenomenon, the redistribution of the labour remuneration in favour of excessive increases in the state sector compared to the private sector, where the average in the manufacturing industry has dropped below 90% of the national average.

It is noteworthy in this context that the three times increase in the additional benefits for the workforce was followed only by two times increase in the turnover in the services sector. They can hardly be supplied from import and the development of this sector has not kept up with the income growth, although the advance was almost double the economic growth rate.

A possible explanation might be the transfer of a substantial share of the extra money earned to the housing price hike, which went again out of the maximum + 6% threshold (after having returned and nearly-missing the “normal” parameters) compared to the previous year, a threshold set as a warning level for the macroeconomic stability.

2- Thus, Romania starts to gradually miss indicators of the 13 that it met one year ago, out of the 14 existing on the so-called macroeconomic stability scoreboard agreed at the European level and the next one on the list is most likely the budget deficit of maximum 3% of GDP).

The employment evolution has returned to the negative range in the second quarter of this year, after it appeared to have improved in the two previous quarters and job vacancy rates are still higher than one year ago. The unemployment remained low compared to the European average but stagnates above the 5% threshold.

3- Only the unexpectedly good (for now) industrial production, the recovery in the construction sector (which remains to be confirmed by the future data) and the employment that is still at an acceptable level have saved for the moment the indicators scoreboard from becoming entirely red on the prospects of economic stability.

4- The yield of government long-term bonds continued to increase and head to 4% after reaching a minimum level of 3.67% in June (quite consistent compared to the practice of other European countries). Which means that we are borrowing at increasing cost levels while we should avoid additional debt.

5- The euro / RON exchange rate, estimated around the first two decimals, has slowly increased since April to the threshold of 4.60 RON / euro. A threshold that will have to be discreetly defended if we want to end the current year with the average of 4.56 RON needed to maintain the value of the new 2017 GDP in euro, recently reassessed at RON 22 billion above the amount envisaged when drafting the budget (about RON 837 billion versus RON 815 billion).

All in all, the data published by Eurostat show that we should take steps to moderate the evolution of some indicators that have “went beyond the edge”. Preferably by governmental measures, where it would be efficient to amend the tax and income policies but of course with the support of the monetary policy, which can only partially compensate the optimization deficit of the Government that seems more concerned with the political disputes than the management of the economy.

Mergeți în homepage ›

Publicat la data de 22.10.2017

Lăsați un comentariu


NEWS

AOAR: Solutions to imbalances produced by chaotic tax legislation - business environment reaction to a slander from a minister

The Businessmen's Association of Romania (AOAR) proposes a series of solutions to get out of the "chaos" of the fiscal and revenue legislation adopted last… Mai mult

Government has approved OUG to preserve income of IT and part-time employees

The Government approved on Thursday the OUG comprising the measures needed to preserve net wages that professional groups exempted from income tax and part-time employees… Mai mult

EBRD: Romania needs to change its economic growth model. Better "sooner than later"

Romania needs to adopt a different economic model if it wants to avoid a crisis caused by the current consumption boom, according to Matteo Patrone,… Mai mult

INS - Context survey: stability or even stagnation, employees about the same but all prices up!

According to the perception of managers from the field, the manufacturing industry will register a relative stability of production volume in the following months (conjuncture… Mai mult

Romanian Business Leaders: List of "signs of distrust" in economic year 2018

The Romanian Business Leaders (RBL) Macroeconomic Confidence Index, of 52.3 points, shows that the entrepreneurs and executives from the most important businesses in Romania have… Mai mult

OLAF runs investigation at Metrorex - possible overpriced payments at Metro Line 5

UPDATE: In a statement issued to RFI, OLAF confirmed the investigation at Metrorex, and its topic - the Metro Line 5 (M5) financed by European… Mai mult

Government goes on Eurobond market and attracts over EUR 3 billion. Complicated yields

The Ministry of Finance is trying to take advantage of the still favourable conditions for emerging government securities and goes on the Eurobonds market with… Mai mult

MFP: Government will borrow RON 74 billion in 2018, only through government bonds

The total volume of loans planned by the Ministry of Finance (MFP) for 2018 amounts to about RON 74 billion. Loans are to be secured… Mai mult

Pessimistic expectations about the future in latest CFA Romania research - economists anticipate a decrease of personal incomes and continuous depreciation of Romanian leu

In December 2017, the macroeconomic confidence indicator of CFA Romania declined to 41 points, the lowest value since April 2013, by 3.1 points below the… Mai mult

Second largest bank in EU, BNP Paribas, opens its branch in Bucharest

BNP Paribas, the largest French bank and the second largest in the EU by the size of assets, will launch its retail operations in Romania… Mai mult

Three options by which BNR intends to moderate lending

The BNR will impose restrictions on credits to the population, to anticipate potential non-payment risks. This could happen in March if the project is approved… Mai mult

Siegfried Muresan: Amendments to Romanian laws on judicial will be discussed in European Parliament

The European Parliament will run debates on the situation of justice in Romania in the next plenary session, in February, in the Strasbourg plenary. The… Mai mult

State has initiated procedure for purchasing 51% of Daewoo's shares at Mangalia Shipyard

The Government approved in the last meeting a memorandum stating that the state will use its preemption right at Mangalia Shipyard and buy the 51%… Mai mult

First major acquisition in 2018 - MApN signs contract with General Dynamics to acquire 227 armoured carriers

Minister of National Defence, Mihai Fifor, participates Friday at the signing of the procurement contract for 227 Piranha V armoured carriers, a release of the… Mai mult

Business environment: Waiving governance rules in state-owned companies, another measure that deepens feeling of distrust

The Foreign Investors Council (FIC) released on Wednesday a statement that expresses its dissatisfaction with the "authorities’ political agenda" containing decisions that "will lead to… Mai mult