The report covers info as of December 19.

Romania’s statistics office announced on December 3 that the country’s GDP advanced by 3.2% y/y in Q3, thus confirming the flash report data issued on November 14. Growth was driven by industry and IT and communications (ITC), but most other sectors also made positive contributions, except for construction and financial services.

Romania’s GDP will grow by 2.6% y/y in 2014 and will accelerate from 2.5% y/y in 2015 to 3.5% y/y in 2018, according to the autumn forecast of the state forecasting body CNP, which was published on November 21.

Romania, the International Monetary Fund (IMF) and the EC reached an agreement over the 2015 budget planning, Prime Minister Victor Ponta announced on December 9. An IMF press release confirmed the agreement and said that a joint mission for a full review of the Stand-by Arrangement will return to Bucharest in January.

The Romanian government of Prime Minister Victor Ponta has drafted an austerity budget for next year, based on limited domestic revenues and severe cuts in public spending, despite previous pledges to cut taxes and raise social spending. The downside risks for budget execution stem from the ambitious EU funds absorption target and potential problems caused by insufficient funding in some areas of the public sector. Both targets – of funds absorption and lower public spending - are feasible in principle, but the government must demonstrate a firm commitment to more efficiency in the way the state functions and zero tolerance for corruption.
The losses of Romania’s banking system will far exceed RON2bn this year, possibly even exceeding the RON2.34bn (€510mn at current exchange rates) deepest losses seen in 2012, according to the head of the surveillance department within the central bank, Nicolae Cinteza. The losses might thus reach some 0.66% of the banking system’s assets, against the return on assets (ROA) ratio of 0.01% in 2013 and minus 0.64% in 2012.

Key Points
• Romanian anti-corruption body investigates irregularities in November 2/16 presidential election
• Parliament takes anti-corruption steps after largest party, leftist PSD loses presidential elections
• Romania reaches agreement with IMF over 1.83%-of-GDP deficit in 2015; government drafts austerity budget for 2015, expects EU funds to boost investments
• Romania confirms 3.2% y/y GDP growth in Q3 driven by industry, ITC
• Industrial output up 3.7% y/y in October; Romania’s exports 4.9% up y/y in October; 12-month exports up 7.9% y/y to €52.4bn
• Construction works index down 11.3% y/y in October
• Retail sales up by 5.8% y/y in October
• Headline inflation eases to 1.26% y/y in November
• Moody’s says that large share of forex loans affects Romania’s banking system
• Banking system’s losses seen hitting 0.66% of assets in 2014
• Balance sheet cleaning of Romanian banks stagnates in October
• Banca Transilvania said to sign deal to take over troubled Volksbank Romania
• C/A deficit narrows by 61% y/y to 0.2% of GDP in Jan-Oct