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  • 7/27/2019 Banca mondial - Date despre Romnia



    WorldBankGroup RomaniaPartnership


  • 7/27/2019 Banca mondial - Date despre Romnia




    Growth and External Performance

    Romania is starting a tentative recovery from theglobal financial crisis, but future growth remainsvulnerable to external factors, notably the weather.The Romanian economy contracted by a cumulative 8

    percent during 2009 and 2010, as a result of the financialcrisis. The implementation in 2011 of a bold package ofmacro-stabilization and structural measures, supported bya multilateral program with the International MonetaryFund (IMF), the European Commission (EC), and theWorld Bank, began to yield results, and Romaniaexperienced a modest economic recovery of 2.2 percent inthat year, led by exports and a good agricultural harvest.However, Romania remained vulnerable to exogenousshocks. Growth was around zero in 2012, as a result ofthree factors: (i) an extreme winter at the start of the year,which hit consumption and industrial output, (ii)

    protracted economic turmoil in the Eurozone, whichresulted in flat exports in 2012, and (iii) a drought, whichhit the agricultural sector. The latter alone shaved anestimated one percentage point from growth during 2012.

    Despite poor growth performance, macroeconomicmanagement has been solid. Following depreciationpressures resulting from political turmoil, the exchangerate has rebounded since the December 2012 elections.The increased political stability has also encouraged areturn of nonresident capital. In addition, Romaniansovereign debt will shortly be included in Barclays and JPMorgans emerging market indexes. This has helped tobring down credit default swap (CDS) spreads on five-yearbonds to under 200 basis points during January 2013.Public debt reached a moderate 38 percent of GDP(complying to Maastricht criteria) at the end of 2012.

    Inflation picked up during the latter half of 2012,reaching nearly 6 percent by January 2013significantly above the 2.5 1 percent targetpartly as aresult of exchange rate depreciation and partly due toincreases in administered gas and electricity tariffs. Thepolicy rate has remained constant since April 2012, but theNational Bank of Romania (NBR) has intervened with the

    aim of reducing short-term exchange rate fluctuations.The crisis led to a sharp curtailment of the currentaccount deficit, which narrowed from 11.6 percent ofGDP in 2008 to around 4.5 percent in 2012. The fiscalbalance fell from 4.1 percent of GDP in 2011 to 2.5percent in 2012 on the back of tight control of spending,which fell in real terms for the second consecutive year.Despite the lack of growth, unemployment remained lowcompared to many European countries and actually fellfrom 7.5 percent in December 2011 to 6.5 percent in

    December 2012 (using standardized Eurostatmethodology). This is likely to have been helped partly bya more flexible Labor Code introduced in 2011.

    Economic activity is expected to pick up only slightlyin 2013 and to remain relatively subdued over themedium term. GDP growth is expected to reach 1.2percent in 2013, with around half of the pick-up comingfrom a rebound in the agricultural sector. Weak externademand from the rest of the European Union (EU)(accounting for 70 percent of Romanian exports) reducedconsumer and business confidence and continued the lowinflows of capital, which will limit growth in other sectorsAbsorption of EU funds (just 12 percent of the 200713available envelope was drawn by the end of 2012) isexpected to continue the pick-up begun during 2012helping to boost growth. An increase in growth to above2.5 percent over the medium term will require increasedinfrastructure and private investment, including from agradual improvement in the absorption of EU Structura

    and Cohesion Funds. Private sector investment can beattracted, notably in the energy, manufacturing, and ITsectors, if structural reforms continue to improve theRomanian investment climate.

    The economic outlook entails significant downsiderisks, particularly in the short run.A deep or protractedrecession in the Eurozone will undermine Romaniasgrowth prospects, and a financial crisis would have a majornegative impact on its exports, currency, and bankingsectors, leading to significant financing difficulties. Theongoing precautionary programs with the IMF, the EC

    and the World Bank (the 1 billion Development PolicyLoan [DPL] deferred drawdown option [DDO] program)partly mitigates some of these risks. The precautionaryprogram with the IMF and the EC will expire in April2013, but the Government is likely to request a successortwo-year program with the IMF.

    Fiscal Performance

    Romania has embarked on a significant fiscaadjustment since 2009 and the Government wasdetermined to exercise continued expenditurerestraint in 2012 and in the preparation of the 2013

    budget. The general government deficit (EuropeanSystem of Accounts [ESA] terms) was brought down from9 percent of GDP in 2009 to 5.2 percent in 2011, andreached its targeted 3 percent of GDP in 2012, ascommitted under the EU Excessive Deficit Procedure(EDP). This was achieved through strict expenditurecontainment, including cuts in public sector wages andpensions, and the adoption of revenue-enhancingmeasures, particularly an increase in the value added tax(VAT) from 19 to 24 percent in 2010. The dynamics of the

  • 7/27/2019 Banca mondial - Date despre Romnia



    structural fiscal balance (cash basis) illustrate the boldnessof the fiscal adjustment package pursued by theGovernment; it declined from 7.5 percent of GDP in 2008to an anticipated 0.9 percent in 2012. The fiscal deficit ona cash basis was 2.5 percent of GDP in 2012, slightlyabove target due to a downward revision of nominal GDPand the delayed receipt of EU funds after irregularities bythe Romanian authorities being discovered. The fiscalconsolidation is planned to continue in 2013 with thebudget targeting a cash deficit of 2.1 percent of GDP (2.4percent in ESA terms), despite cuts in nominal GDP.Under the EU Fiscal Compact, Romania has set amedium-term objective of 0.7 percent of GDP for thestructural fiscal deficit.

    Financial Sector

    Despite increasing strains, the Romanian bankingsector maintains significant buffers to deal withpressures and mitigate risks. Driven by the weakeconomic environment, depreciation of the leu, andlimited possibility of the banks to write them off, due tocurrent legislation and banks own lack of appetite,nonperforming loans (NPLs) increased to 18 percent by

    the end of 2012, from 14 percent at end-2011. However,the capitalization of the banking sector remained strong at14.7 percent at end-June 2012, albeit with differencesbetween banks, reflecting continued shareholder supportand retained earnings. All banks except one have a capitalratio above the regulatory minimum of 10 percent. Greekbanks continue to exhibit capital buffers exceeding thesystem average, owing to capital injections from parentbanks. The introduction of International Financial

    Reporting Standards (IFRS) provisioning in early 2012 hasgone smoothly, and the maintenance of a prudential filterand proactive bank supervision has ensured that a prudenprovisioning regime remains in place.

    The authorities have introduced several regulatoryand legislative changes that aim to safeguard financiastability and strengthen crisis managementarrangements and contingency planning. The NBRadopted measures in 2011 to restrict foreign currencylending to unhedged household borrowers; it has alsocontinued to closely oversee bank practices to avoid ever-greening to ensure that IFRS loan-loss provisioning andcollateral valuations, as well as the assessment of the credirisk of restructured loans, remain prudent and in line withgood international practices. In June 2012, the fiscal codewas amended to ensure a neutral tax treatment of bankreceivables sold to Romanian firms in order to enablebanks to improve their balance sheet management. InJanuary 2012, amendments to the bank resolution

    legislation were adopted that introduced bridge bank andother resolution powers for dealing with failing banks. TheNBR, Deposit Guarantee Fund (DGF), and Ministry ofPublic Finance continue to coordinate the implementationof operational preparedness plans.

    Structural Reform Agenda

    The crisis prompted long-needed reforms. Thefinancial difficulties gave rise to a series of reforms, withsupport from international financial institutions (IFIs), inhealth, education, the financial sector, public financiamanagement (such as treasury and debt managementmacro forecasting capacity, strategic prioritization in the

    Table 1. Key Economic Indicators Sources:IMF, MoPF, INS, Staff estimates

    2010 2011 2012 2013

    Annual Annual Est. Proj.

    Real growth, % -1.1 2.2 0.2 1.2

    Real growth excl. agriculture, % -0.6 1.7 1.3 0.5

    Fiscal balance (% GDP) /1 -6.3 -4.1 -2.5 -2.1

    Structural fiscal balance (% GDP) /1 -6.4 -4.1 -2.4 -2.0

    Real growth of public spending (% change) -1.5 -4.1 -3.8 -1.0

    Public sector debt (% of GDP) /1 30.5 34.7 38.1 38.7

    EU funds absorption (% allocations) 3.7 5.6 11.5 16.0

    Current Account Balance (% GDP) -4.4 -4.5 -3.6 -3.6

    Imports of G&S (% GDP) 41.1 45.4 41.1* 41.1

    Exports of G&S (% GDP) 35.4 40.0 37.8* 37.8

    Unemployment (%, eop) 7.1 7.5 6.5 6.5

    Inflation (%, eop) 8.1 3.2 5.0 3.0

    *As of October 2012; . 1/ On a cash basis. Methodology currently being revised; 2/ Maastrict criteria using revised GDP, excluding NBRs


  • 7/27/2019 Banca mondial - Date despre Romnia



    budget process), public administration, social insura