UNICREDIT BANK S.A.

 | 

ANCA ARON

  |  2016-09-12

Companies Face Difficulties in Capitalizing on Strong Internal Demand

The Romanian consumption grows at the highest pace in the CEE region.

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UNICREDIT BANK S.A.


ANCA ARON

ANCA ARON

SENIOR ECONOMIST at UNICREDIT BANK S.A.

In 2015, the Romanian economy continued to expand at one of the highest paces in the region for the fourth consecutive year, by 3.8% [fig. 1]. In terms of growth composition, a common trend emerged in Europe, with private consumption as a main driver, compensating for the lower exports on the back of a slowdown in external demand. At the same time, investments contributed positively to the economic expansion, driven by a pickup in EU fund absorption, given that 2015 was the last year for absorbing funds under the 2007-2013 programming period. We expect investments to slow down as the absorption of EU funds will temper this year for all countries, because of the usual delays at the start of a new programming period. In Romania, the launch of the 2014-2020 Programme was not accurately prepared in advance and the country still finds itself in the preliminary phase of fulfilling ex-ante conditions. 

 

Additionally, on 23 June, the United Kingdom held a referendum on EU membership and the British people voted to leave the Union. This is an unprecedented decision, which will create prolonged uncertainty and will likely determine companies to postpone investments while trying to gauge the impact. The exit negotiations will be complex and will take around two years after the Great Britain formally informs the EU about its decision. Looking at the medium-term, the UK’s exit from the EU would affect Romania through: trade relations, migration and EU funds, given that UK is a great contributor to the EU budget. The more diligent countries might absorb more and faster, leaving less funds available for the laggers, among which Romania.


By comparing the growth rates of consumption among CEE countries, we see that Romanian consumption has been growing faster by around 2pp than any of the other countries in the region [fig. 2]. This was caused by the fact that besides the stimuli from which consumption benefitted throughout the region (the low inflation following the collapse of oil prices, wage growth, consumer confidence and the recovery of lending), Romanian consumers also benefitted from: i) several hikes to the minimum wage to RON 1250 currently (up almost 40% in comparison to its level at the end of 2014), ii) salary increases for public sector employees1 , iii) fiscal relaxation through two waves of VAT cuts2 , iv) the recovery of consumer lending in local currency.

 


 

  

 

 

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TOP TRADE, METAL COMPANIES (2015)
Scoring Methodology by ERNST&YOUNG


 
#
COMPANY NAME
MCR TOTAL SCORING
 
1 MAIRON GALATI SA 3,0000
2 MOLD STEEL IMPORT-EXPORT SRL 2,6250
3 A-KEMI SRL 2,5000
4 MIRAS INTERNATIONAL SRL 2,3125
5 BAUROM CONSTRUCT SRL 2,1250
6 MELINDA-IMPEX STEEL SA 2,1250
7 DACOTRANS SRL 2,1250
8 DAN STEEL GROUP NEGRESTI OAS SA 2,0625
9 KONIG FRANKSTAHL SRL 2,0625
10 COLOR-METAL SRL 2,0000