August 2004
Romanian exports go on recording a sustained dynamics mirrored by a 20.2-percent surge against H1 2003, Minister-Delegate for Trade Eugen Dijmarescu said. In June, exports hiked 4.6 percent against May, while imports increased a mere 1.1 percent. Actually, the highest monthly surge in exports, put at 1.635 billion euros, was also reported in June. An under-evaluation of Romanian IT products and services has been reported, with the licensing methodology of such produce, which is not exclusively subject to custom clearance, needing further consideration. According to the Economy and Trade Ministry's (MEC) dialogue with associations acting in the field, annual exports of IT products and services range between 500 million and 1 billion euros. The imports are equally high, posting a 22-percent hike against the first half of last year.
"We should take into account the fact that the imports are encouraged, besides traditional factors such as economic growth, increases in people's revenues and investment, by the one-sided flow towards Romania of EU pre-accession funds, which account for a significant share of the goods and services imports, as well as by the surge in direct capital investment, totalling 845 million euros in the first five months of 2004, of which a great share is accounted for by payment in kind, output equipment respectively," Dijmarescu said. Thus, according to preliminary projections for 2003, goods and services purchased from abroad under ISPA, Phare and CBC programmes were put at 493 million euros. Reviewing the aforementioned data, MEC considers that the trade deficit is not a reason for concern in the medium run, as it is financed via healthy means, accounted for by capital transfers under pre-accession funds and net direct capital investment. As for exports, its is to be noted that the average monthly figures in 2004 are nearly double those in 2000, which not only points to higher competitiveness of Romanian products but also to structure and management changes at enterprise level. This enabled that over 75 percent of exports go to EU markets and North America, which are well-known for their high quality standards. Romania's conclusion of free trade exchange agreements with countries in the Balkans resulted in a surge in mutual exchanges from 1.5 to 2.1 billion euros in H1 2004, with operations yielding 354.7 million euros in excess for companies based in Romania.
(source: ACT Media)
Value of June's exports, highest monthly value in past 14 years
The value of June 2004 exports stood at 1,635.0 million euros and represents the highest monthly value registered since 1990, the National Institute of Statistics informs.
In the structure on goods of the H1 exports, the biggest share belongs to clothing items, with a value of 2,031.3 million euros, that is 22.5 per cent in the total of H1 exports.
Moreover, the machineries, mechanical devices, apparatuses, electrical equipment and electronic products represent 18.2 per cent in the total of exports in the said period, with a value of 1,643.7 million euros, while metallurgic products represent 14.9 per cent, with a value of 1,342.7 million euros. Compared to H1, 2003, the value of the exports to the EU rose 19.4 per cent, representing 73.7 per cent in the total of exports. In H1, 2004, Romania's first 10 commercial partners in terms of exports (representing 74.3 per cent in the total of exports) were Italy (22.1 per cent), Germany (14.9 per cent), France (9.0 per cent), Turkey (6.7 per cent), UK (6.6 per cent), Hungary (3.8 per cent), Austria (3.3 per cent), Holland (3.0 per cent), Greece (2.5 per cent) and USA (2.4 per cent).
(source: ACT Media)
Intervention rate to be reduced by 0.75 percent every two weeks
The National Bank of Romania (BNR) will reduce the intervention rate by 0.75 percent every two weeks in the near future, daily Bursa quotes official sources as saying on Wednesday. The intervention rate is the interest rate that BNR pays on deposits attracted from commercial banks in order to prevent excessive cash on the monetary market.
Within a broader effort to cut the inflation rate, BNR first spread the message that commercial interest rates would go down when it first reduced the intervention rate by 0.5 percentage points in early June. A month later, BNR reduced the interest rate again, but by 0.75 percentage points. A number of banks reacted to this trend and reduced their interest rate. BNR officials said that the interest cut would be prudent, in order not to fuel a credit surge that could further lead to a higher inflation rate and a higher foreign deficit.
For the time being, the intervention rate stands at 20 percent. Bank officials consider that, in order to be consistent with the nine percent inflation rate target, the official rate should decrease to 14 to 15 percent by year-end.
(source: ACT Media)
BNR international reserves reach 9.7million euros at end-July 2004
The international reserves of Romania's Central Bank (BNR) - foreign exchange plus gold - reached 9.7 billion euros at end-July 2004, BNR reports. The forex reserves stood at 8.61 billion euros, up a record monthly 852.5 million euros. The rise recorded in July is the result of BNR purchases of 629.3 million euros, inflows of 207.4 million euros worth of PSAL and SAPARD funds as well as of revenues of 18.0 million euros derived from international reserves management. BNR also says it paid out 91.5 million euros to service the direct foreign debt guaranteed by the Finance Ministry. Other net inflows were reported from the difference resulting from the modifications in the statutory forex reserves of commercial banks, bank fees and dues, which totalled 89.3 million euros. The gold reserve stayed at 105.1 tonnes, going down in value to 1,092.6 million euros on the developments in the international gold prices. BNR will have to provide this year 516.4 million euros for servicing the direct public foreign debt guaranteed by the Finance Ministry.
(source: ACT Media)
Foreign investment in Romania reaches almost $800 million
Direct foreign investment in Romania touched $779 million (658 million euros) in the first half of 2004, up 7.7 percent year on year, Ziarul Financiar reports on Wednesday.Data with the National Commercial Companies Registry show foreign investment standing at 25.3 million euros at end-June 2004, down 70 percent on a monthly basis. Foreign investment was high in January, when 211 million euros were invested, and low in March, when 24.5 million euros were provided as foreign investment. The number of newly established commercial companies over the same period was 820, on a paid up capital of 11.6 million euros. Italian were the busiest foreign investors in Romania, having created 216 new companies, followed by Germans (91) and Hungarians (52). In terms of the paid-up capital size, Austrians ranked first, with 9.9 million euros. Direct foreign investment in Romania totalled 1.3 billion euros in 2003 and is expected to rise 30-40 percent in 2004.
(source: ACT Media)
Agency for Foreign Investment involved in projects worth EUR 2.4 bn
The Romanian Agency for Foreign Investment (ARIS) is currently involved in investment projects worth 2.4 billion euros in constructions, automobile components, real estate and home appliances. According to the new president Alexandru Popa these projects have reached various stages, from making a decision on the location to production launch.The only projects he did speak about were those of Portuguese company Quinto, which plans to invest in an automobile upholstery plant, and of ARC Automotive, an Italian company which intends to open a motor component plant to produce air-bags and other security systems. "They will produce mainly for foreign markets, but they may also supply products domestically for Renault," the ARIS president said. An important project is carried out in Calarasi, where Saint-Gobain group launched construction of a glass plant. The investment, according to the ARIS President, amounts to 100 million euros and will be completed early next year, the same daily reads.
Another project in an advanced negotiation stage is that implemented by the Swedish group Electrolux, which is to choose between Romania and Poland for a EUR 50 M investment in a washing machine production facility. "Electrolux officials say transport costs in Romania are higher than in Poland, which is why they have asked for additional facilities. However, it is important for us to comply with EU regulations regarding facilities and State-funded aid," ARIS official explained. In order to meet the requirements of foreign investors, ARIS will establish the Foreign Investment Registry. "At the moment there is no institution to provide information on foreign investments in line with IMF or UNCTAD norms. What we mean is to consolidate such information and to have a better image of the flow of direct investments attracted into Romania," Popa explained. According to data supplied by the National Bank of Romania for the first 5 months of the year, Romania attracted 38 percent more foreign investments than in the corresponding period of last year, i.e. 754 million compared to 544 million euros in 2003. "These data confirm estimates made earlier this year, pointing to a foreign direct investment volume of over 2 billion euros this year," ARIS vice-president Petrisor Peiu
(source: ACT Media)
Fitch Changes Romania's outlook to positive
Fitch Ratings, the international rating agency, has today revised the Outlook for Romania's Long-term foreign currency rating of 'BB' and Long-term local currency 'BB+' to Positive from Stable. The Short-term rating is affirmed at 'B' and the Country Ceiling rating at 'BB'.
The Outlook change reflects a number of positive developments, which include ongoing fiscal consolidation and progress on the privatisation programme. The signing of a new two-year IMF standby agreement in July should support policy discipline and increase confidence that there will not be any major disruption to Romania's economic reform programme and EU accession ambitions ahead of and after the parliamentary and presidential elections scheduled for 28 November 2004.
The completion in July of the big-ticket privatisation of state utility SNP Petrom is a further positive development, and builds on other energy sector privatisation that includes electricity companies and the natural gas utilities (sale in process). The sizeable proceeds from the SNP sale (669 million euros initially, plus 800 million euros or more in investment commitments) will provide a valuable source of budget and current account financing in 2005, helping to stabilise the general government debt burden.
Petrom's privatization should also be received positively by the EU as part of Romania's commitment to the restructuring of the domestic energy sector. Fitch believes that it raises the likelihood of Romania receiving 'functioning market economy (FME)' status from the EU when the 2004 progress report is published in October this year. FME is an important pre-condition necessary to finalise EU accession negotiations, although as Romania still has to close six-negotiation chapters FME status would not guarantee completion of the EU negotiation process.
Strong GDP growth (forecast at 5.5 percent this year) is bolstering budget revenues and driving down the fiscal deficit for 2004. The government has managed expenditure wisely for the year so far, and there is little evidence of fiscal loosening ahead of the November elections. A combination of the new IMF programme and the importance to the government of closing all outstanding EU negotiating chapters should ensure that fiscal slippage during the second half of the year is relatively well contained. Consequently, a general government deficit of 2.1 percent GDP for 2004 looks realistic following a supplemental budget in July, representing a major improvement on the 3 percent GDP initially targeted for this year. Receipts from the SNP Petrom sale will provide an important source of fiscal financing next year while relatively buoyant privatisation receipts this year should allow general government debt to fall modestly to 25.6 percent GDP by the end of 2004 from 27 percent at end-2003.
A new fuel price rise in period ahead possible only if oil price exceeds 50 dollars per barrel
The price for fuel will go up in the next period only if the price of the oil barrel will exceed the level of 50 dollars, Romanian Minister of Economy and Trade Dan Ioan Popescu said here on Tuesday. There will be no other increases in prices for the natural gas and electricity except for the periodical ones set with the international financial bodies, he added. "I believe that there will be no rises for electricity because the costs are covered at the moment and we can take into consideration only the necessary investments to cope with the electric power needs for the 2007-2008 period", Popescu said. The minister said that the rise in the crude oil price on the international markets from 32-34 to 46 dollars per barrel forced the National Oil Corporation SNP Petrom to adjust the fuel price as of August 20 in order to cover its refining, distribution and internal costs, since the company imports 30 percent of the crude oil it processes. "This 30 percent increase in fuel prices affected Petrom Oil Company's internal costs and could not be borne anymore. We had to make the rise to avoid running at a loss", Popescu concluded.
(source: ACT Media)
FDI in excess of 1 billion euros in H1
Foreign direct investment (FDI) in Romania made by non-resident citizens reached 1.164 billion euros ($1.436 billion) in the first 6 months of the year, according to data supplied by the National Bank of Romania to the Romanian Agency for Foreign Investments (ARIS).
The amount is 60.11 percent higher than in the corresponding period of last year, when the volume of foreign direct investment reached 727 million euros ($897.4 million). FDI in June amounted to 402 million euros, the highest level since the beginning of the year.
As ARIS chairman Alexandru Popa stated, the figure includes the amount generated by the privatisation of the Romanian Commercial Bank - BCR (108.7 million euros), as well as the capital increase operations carried out by companies Automobile Dacia, Michelin, Unilever, the Constanta Ship Yard, and Industria Sarmei Campia Turzii. Of note is that, according to the National Trade Registry Office (ONRC), the value of share capital in companies running on foreign capital was 69 percent higher in the first half of this year than in the corresponding period of 2003. Thus, ONRC data reveals that over January - June 2004 the value of share capital underwritten by foreign investors in Romania exceeded 658 million euros, compared to nearly 414 million euros last year.
"The evolution of the foreign direct investment inflow in the first 6 months of the year reflects the ascending trend Romania is following, the improvement of the investment environment, and the country's attractiveness as a destination for foreign investors," Popa said. Moreover, he says the completion of the land restitution process favoured the development of greenfield investments, while settlement of the legal statute of local utilities networks, development of industrial complexes around the country, facilities granted to foreign investors and the development of the domestic private capital are other elements triggering this evolution.
"The rise in the foreign capital flow is also expected to follow the same upward trend in the second half of the year, given that the privatisation of important state-owned companies in the petroleum, natural gas distribution and electricity sectors will bear fruit, financially speaking," Popa said, adding that this way the Romanian economy will meet the minimum conditions required in order to functions against the parameters of a market economy.
"This is a favourable development, and we expect a rise in the volume of foreign direct investments attracted by Romania by year end. The increase is accelerated by the finalisation of the Petrom sale, which will bring the FDI level up to $2 billion," Ruxandra Stan, general manager of the Foreign Investors Council (FIC) has recently stated. According to Stan, even if $2 billion is attracted, as ARIS and the Economist Intelligence Unit forecast, FDI per capita in Romania (95 euros) will still be below the European average. Also, the FIC official warns that Romania will have to make more effort to be the destination of future investments.
"This year the series of large scale privatisation procedures concludes. Romania will have to focus on a more aggressive promotion policy, because the competition in the region will be fierce, and those who offer a more stable, transparent and predictable business environment will win," Stan explained. The FIC official also said that Romania needs to seize the opportunity offered by North American and Western European companies relocating operations to Central and Eastern Europe. "If we don't seize this opportunity and don't offer an attractive business environment now, the wave will move on to China and other countries in the region," Ruxandra Stan concluded.
(source: ACT Media)