Page 47 - bne_Magazine_May_2017_print

bne May 2017 Special focus I 47
ILO unemployment hits new post-crisis minimum
Romania’s ILO unemployment, season- ally adjusted, dropped by 0.2pp m/m and 1.2pp y/y to 5.5% in December, reaching a new minimum following the global financial crisis. Registered unem- ployment hovered below 4.8% during the year, a level that is again close to the record low levels in 2008-2009.
Read the chart: ILO unemployment (red line) is seasonally adjusted (only monthly data). Registered unemployment (yellow)
is not seasonally adjusted.
Employment (blue column) is expressed in thousands.
Romania Unemployment vs. Employment
Overdue bank loans fall as banks sell off NPLs
The stock of overdue bank loans in Roma- nia contracted by 35% y/y to RON13.4bn (€3.0bn) at the end of January according to data reported by the central bank. Overdue loans increased marginally from €2.9bn at the end of December, but they accounted for only 6.1% of the total stock of loans compared to 9.5% one year earlier.
Payment discipline has improved mark- edly over the past three years and the overdue loans to total loans ratio con- tracted from its peak of above 15% in ear- ly 2014. The improvement in fact reflect- ed the sale of large bundles of bad loans.
Romania Non Performing Loans ratio (%)
Macroeconomic overview
Romania’s economy grew by 4.8% in 2016 and will expand at a high rate this year as well (the European Commission forecast 4.4% growth), but the side-effects of the fiscal stimulus pose risks that need to be addressed. Failure to do this, which we believe to be the baseline scenario, would result in a wide budget deficit and, more importantly, sluggish progress in on infrastructure works.
Similarly, a significant improvement of the public adminis- tration seems unlikely at this moment, with the result of a complicated political and economic situation over the next year. Political developments will have a major impact on macroeconomic developments, particularly concerning the speed of deterioration of macroeconomic balances.
Iulian Ernst in Bucharest
The current account and general government bud- get balances are likely to deteriorate during the year from the current safe levels, with a negative impact on public debt and price stability. The central bank’s policy of defending the nominal exchange rate could result in abnormal currency strengthening, but this depends on exogenous factors such as the US Federal Reserve.
This is an excerpt from bne IntelliNews’ latest Romania country report. For more information on our regular reports on Romania and other countries, see www.intellinews.com/reports.
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