The report covers info as of January 19.

The domestic macroeconomic conditions have improved surprisingly through 2014, despite government cutting the investments by a massive 25%. Euro area’s uncertain outlook, ahead of elections in Greece and ECB steps aimed at fighting deflation, is the main threat to country’s further growth – more important than the crisis in Ukraine that is also far from finding a resolution. On the upside, the low energy prices have a positive and immediate impact on country’s performance.
The 2.9% y/y GDP growth in Jan-Sep was driven solely by the public consumption, hence it was not exactly sustainable. Furthermore data is slightly inconsistent with the preliminary budget execution figures. Earlier in 2013, the 3.5% growth was driven by external demand [net exports]. In 2015, the growth is supposed to come from a combination of consumption and investments.

Politically, the situation remains complicated but not tense. After winning the presidential elections, main opposition party PNL wants to take full power. Far from being hostile to senior ruling PSD, it explores ways to overthrow the cabinet of PM Victor Ponta. PM Ponta in his turn has adjusted his rhetoric and plans to stay in office by the end of his term in the fall of 2016.

Key Points
• EBRD keeps 2015 GDP growth forecast for Romania at 2.8%
• Industrial output marginally up in November, grows by 0.2% y/y; up 6.% y/y in rolling 12 months
• Exports lose momentum, still grow 2.3% y/y in November; up 7.5% y/y in rolling 12 months
• Construction work up 2.2% up y/y in November, after disappointing year; 8.6% down y/y in rolling 12 months
• Retail sales rises for 15th month in row, up 7.1% y/y in November; up 7.2% y/y in rolling 12 months
• Headline inflation eases to 0.83% y/y on lower fuel prices; c-bank cuts policy interest rate by 25bp to 2.5%, more cuts to follow
• Budget deficit hits 1.98% of GDP in 2014 – preliminary data
• Romania to issue Eurobond in H1, extend maturity over 10 years
• CHF strengthening no risk to Romanian banking system stability – c-bank
• Cleaning of Romanian banks' balance sheets loses momentum in Oct-Nov
• C/A gap narrows by 62% y/y to some 0.2% of GDP in Jan-Nov