This report covers the main Romanian macroeconomic releases of March 2014 as well as financial and political trends in the country during this period. The short-term indicators released during the period refer mainly to January to February period of this year.

February industrial output and exports figures, released in early April, have brought optimism among analysts -- who upped their forecast for this year toward 3% and even more. Constructions sector lags behind, but the activity in this sector is seasonally weak. On a positive note, constructors express moderately optimistic views despite the sharp activity decline indicated by the official figures.

Besides industrial output and exports, retail sales and wages have also improved in January to February thus supporting positive expectations created in Q4 last year.

Romania’s statistics office has confirmed the 3.5% year on year GDP growth for 2013 and operated some revisions, under the second preliminary estimates. The contribution to the GDP growth was upward adjusted for domestic demand – for both consumption [from 0.3pps to 0.6pps] and gross fixed capital formation [from minus 1.5pps to minus 0.9pps]. Exports’ contribution was also upped from 4.1pps to 4.4pps.

The IMF has maintained its 2014 GDP projection for Romania to 2.2% under the latest World Economic Outlook even if downgrading the prospect for whole Emerging and Developing Europe* to 2.4% from 2.7% under the previous version of WEO dated October 2013.

Key Points:
• Industrial Expansion continues: Industrial output up 8.8% year on year in February 2014; by 9.5% year on year in January to February
• Exports up 12% year on year in February but trade deficit still widens
• Private Consumption Rises: Retail sales up 8.7% year on year in Feb and by 7% year on year in January to February; Services deliveried to households up 10.1% year on year in February
• Headline inflation remains around 1% year on year in March 2014
• January to February budget deficit up 25% year on year to 0.46% of GDP. Main problems are on the collection side.
• Romania’s non-performing loans ratio up 3.65pps year on year to 22.31% at end of January. Romania to draft NPL resolution strategy by end of May, under IMF stand-by deal
• Bank loans shrink 2% year on year at end of February, local currency lending gains ground slightly. Credit dynamics in Romania to turn positive in several months – c-bank governor.