SIMILAR ARTICLES

BNR – Risk map: Credit default risk got right to “high” level top position

The deterioration of investors’ confidence in emerging economies and the default risk of loans to companies and population are the biggest risks to financial stability… Mai mult

A (new) paradox: Public debt decreases as a share of GDP – cost increases with interest to what we borrow. Remarks

Although medium- and long-term foreign debt (DETML) has declined steadily over the last four years related to GDP, the amount paid for this debt has… Mai mult

Current account deficit – 15% higher after first four months of 2018

The current account of the balance of payments registered a deficit of EUR 2,053 million in the first four months of this year, about 15%… Mai mult

We and Juncker Plan: Bulgaria – 3rd position, Romania – 23rd position. How other neighbours are doing

The value and economic impact of the Romanian projects to attract resources from the so-called “Juncker Plan” of European investments are much lower, compared to… Mai mult

Sovereign Fund has been voted: Mechanism to remove “states’ pearls” from public control

The voting machine of the Chamber of Deputies (decision chamber) approved on Wednesday – 174 votes for, 98 against and 3 abstentions – the Law… 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

Subsidy of RON 900/month for employing a graduate based on contracts of indefinite duration

The National Agency for Employment (ANOFM) grants subsidies of RON 900/month to employers who employ graduates of educational institutions, with contracts of indefinite duration, within… Mai mult

C.P. Tariceanu, before the heads of Senates from EU: The European Commission has encouraged the parallel state, in Romania it is like in the 50's

Calin Popescu Tariceanu (foto) delivered a very tough speech on Friday, in the Senate, addressed to the European Commission, which he accused of encouraging the… Mai mult

National Bank of Romania wants to lower indebtedness limit in granting loans to individuals

The National Bank of Romania (BNR) sent to banks for consultation a draft amending Regulation 17/2012, which provides for a consistent lowering of the indebtedness… Mai mult

High impact provisions: Senate has adopted PSD-ALDE amendments to the Code of Criminal Procedure

Senators adopted on Wednesday the draft for amending the Code of Criminal Procedure, by 74 votes for to 28, against. The bill goes to the… Mai mult

RBL: Workforce crisis is worse than economic crisis - 3.4 million Romanians have left the country in last 10 years

Migration is one of the most serious problems facing Romania at this time, along with the lack of infrastructure. However, the return of Romanians to… Mai mult

World Bank: Romania's economy could grow by 5.1% in 2018

Romania's economy could grow by 5.1% in 2018, according to the World Bank summer forecast. The estimate has been improved by 0.6 percentage points above… Mai mult

Ministry of Energy: Natural gas from Black Sea will be exported through Onesti - Isaccea - Negru Voda network

The Ministry of Energy issued for Transgaz the construction permit for the consolidation of the transport system between Onesti (Bacau) and Isaccea (Tulcea) and for… Mai mult

Energy productivity: Romania goes up within Central European group

Romania reached 56% of the EU's average energy productivity in 2016, compared to only 43% in the year of the accession, according to data released… Mai mult

Document / Public procurement - Changes made by OUG: how to calculate guarantees, values over which contract must be publicly announced, how to change contract without resuming procedures

Under the promise of reducing bureaucracy and increasing efficiency in the public procurement procedure, the Government approved on Thursday an emergency ordinance that brings essential… Mai mult

AmCham: Romania should have a national investment plan. Four major areas with competitive potential

The consistency of the measures needed to encourage public and private investment, as well as proposals for the development of the four major areas considered… Mai mult

"We are pulling ourselves out of maps!": Business community’s solutions for infrastructure development

In the medium and long term, companies in Romania lose business because of disarticulated infrastructure; the country overall loses new investment, the state budget loses… Mai mult

New Romania’s Agent at the EU Court of Justice: 32 years old, failed exams, a person supported by Olguta Vasilescu

The government agent at the EU Court of Justice, Razvan Horatiu Radu, was replaced by the Government by a decision of Prime Minister Viorica Dancila… Mai mult

European Commission urges Government to "fully and immediately" reimburse car taxes

The European Commission asks Romania to urgently align the system of taxes collected on the car registration to the European one. The request is announced… Mai mult

CCR President in a visit to Russia, despite that Ministry of Foreign Affairs has recommended not to make this visit

CCR President Valer Dorneanu is in Russia today, where he attends the Sankt Petersburg International Legal Forum, despite that MAE has recommended not to make… Mai mult

List of black payments / Corruption in health sectors: Bribes - 25% of contract value, higher than in other fields

Romania is the European country with the lowest spending in the health sector. However, DNA statistics show that the bribe in this field is higher… Mai mult