Books on Romania
% of GDP
Update No: 089 - (30/09/04)
On Nov 28th, Romanian voters will elect a president and renew their
parliament. Prime Minister, Adrian Nastase, remains the top contender in
Romania's presidential race, to replace Ion Ilescu, a septuagenarian deemed due
to stand down. According to a poll by CURS released by Antena. 43 % of
respondents would vote for Nastase, candidate for the Social Democratic Party (PDS).
Former prime minister, Theodor Stolojan, of the Justice and Truth (DA)
coalition-which encompasses the National Liberal Party (PNL) and the Democratic
Party (PD)-is in second place with 35 %, followed by Vadim Tudor of the Party of
Great Romania (PRM) with 15%. His poor following is welcome news in Brussels,
which is not keen on racist mavericks, such as he is.
Codrut Seres of the Humanist Party of Romania (PUR) and Lia Roberts, a former
chairwoman for the Republican Party in the state of Nevada, each garner the
support of three per cent of respondents. Roberts holds dual American-Romanian
Romania at large
Romania is doing rather well in the difficult circumstances of a post-communist
collapse. The Ceausescu regime was particularly awful. But the nation of 21.7
million is pulling together.
It has become a hive of inward FDI. Foreign investors are aware of its immense
advantages. It has an economy growing at about 5% per year. Its eastern coast
comprises a huge chunk of the western half of the Black Sea, the logical venue
for Caspian Sea and other energy exports westwards. It is indeed a significant
entrepot for oil which, conveyed in giant barges, make their way up the Danube
into Central Europe and Germany beyond. It will probably become so in due
course, once the Turkish alternative has become less fashionable.
Nastase in Washington
President Bush thanked Romanian Prime Minister, Adrian Nastase, on July 21 for
his "understanding that we need to work together to fight terror."
During a joint photo opportunity with Bush at the White House, Nastase said he
had come "to confirm to the President our continuous support for fighting
together terrorists in the world. And also our support for the vision of
President Bush not only on general issues, but very specifically on a very
complex process of changes in Iraq."
It is clear that the Romanian government hope that this forelock touching will
advantage them with the US administration
Asked how to improve economic relations between Romania and the United States,
Bush replied that investment decisions in the United States are made by private
enterprises, not government.
7-months car sales surge 32%
The Romanian market for new cars grew 32.4% year-on-year over the first seven
months of the year, reaching 77,105 sold units, said the Association of
Automobile Manufacturers and Importers (APIA) recently. The domestic output
advanced by 36.1% in the said interval, reaching 51,945 units, while imports
gained over 33%, reaching 30,236 units. Exports, on the other hand, surged
133.2% to 9,395 units. Domestic car brands Dacia and Daewoo remained market
leaders with 29,501 and 17,266 sold units, respectively. Renault maintained its
leading position among imported brands with 5,707 sold units, New Europe
Romanian government grants 600m subsidy to national airline
The Competition Council approved the granting of public aid worth 600m to the
Romanian national Tarom airline, Competition Council President, Mihai Berinde,
said, daily Ziarul Financiar reported.
Total public grants-in-aid authorised or under authorisation now in Romania
stand at 1.8bn, of which about 1bn go to the steel industry alone.
Tarom airline has had a difficult period for some time and has reported losses.
Although feasibility studies were made, one of them by Lufthansa Consulting, the
targets have not been hit in the past few years. The company made a loss of
US$14.5m in 2003, when it posted a turnover of US$220m. The loss is expected to
drop to US$6m this year. According to Tarom officials, the company can be
profitable in 2005.
Volksbank Romania net profit climbs
Volksbank Romania posted recently a net profit of 1.53m in the first half
of 2003, up 355% year-on-year, New Europe reported.
Overall asset value gained 55% reaching 181m. In the said interval the bank
granted loans totalling 141.7m, up 82.3% year-on-year, and deposits worth
60.4m, up 76.6%. The bank has some 34,000 customers and 14 branches across
the country. Volksbank Romania concluded last year with a net profit of 24.3bn
lei and overall assets worth 6trn lei. The bank is controlled by Osterreichische
Volksbanken AG with 99.96% of the share capital.
Fitch changes Romania's outlook to positive
Fitch Ratings said recently it revised the outlook for Romania's long-term
foreign currency rating of BB and long-term local currency rating of BB-plus to
positive from stable, New Europe reported recently. The short-term rating is
affirmed at B and the country ceiling rating at BB, the agency said in a
The change in outlook reflects positive developments, as fiscal consolidation
and progress on the privatisation programme continue, Fitch said. The rating
agency noted that the completion in July of the big-ticket privatisation of
state utility SNP Petrom builds on other energy sector privatisations that
include electricity companies and the natural gas utilities (sale in process).
The sizeable proceeds from the SNP sale 669m initially, plus 800m 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, Fitch said. The signing of a new two-year IMF standby agreement in July
and the completion of the privatisation of state utility SNP Petrom increases
confidence in Romania's economic reform programme ahead of the parliamentary and
presidential elections scheduled for November 28th, 2004, Fitch said.
"The sale of SNP should also be received positively by the EU as part of
Romania's commitment to the restructuring of the domestic energy sector,"
Fitch said. The rating agency added that SNP sale raises the likelihood of
Romania receiving "functioning market economy (FME)" status from the
EU when the 2004 progress report is published in October.
"FME is an important precondition necessary to finalise EU accession
negotiations, although as Romania still has to close 6 outstanding accession
criteria (chapters) FME status would not guarantee completion of the EU
negotiation process," the agency said in its report.
Strong gross domestic product (GDP) growth forecast at 5.5% this year is
bolstering budget revenues and driving down the fiscal deficit for 2004, said
the rating agency. "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," Fitch noted.
Consequently, a general government deficit of 2.1% GDP for 2004 looks realistic
following a supplemental budget in July, representing a major improvement on the
3% GDP initially targeted for this year, the agency added. "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% GDP by the end of 2004 from
27% at end-2003," it said.
Constraints on the rating include rapid credit growth that has contributed to
the widening of the current account deficit in recent years and which is
expected to reach 6.1% GDP in 2004, albeit largely unchanged on 5.9% GDP in
2003. The situation necessitates continued monitoring as rapid credit growth
could create problems for the banking system and by overheating the economy
could complicate efforts to bring inflation down to single digits as well as
raising external financing needs, Fitch said.
"There are signs that the very rapid pace of credit growth to the private
sector seen in 2003 (55% growth) is slowing down, while foreign direct
investment flows should account for some 55-60% of current account financing in
2004, and increase to perhaps 70% in 2005. Romania will continue to rely on
debt-creating external inflows, but with gross external debt at around 35% of
GDP and expected to stabilise seems sustainable," Fitch analysts said.
The agency also said that despite large current account deficits, Romania
continues to generate sizeable balance of payments surpluses, and foreign
reserves should reach an all-time high of US$8.7bn or more (including gold) by
the end of 2004. External liquidity is therefore strong, equivalent in 2004 to
roughly 150% of short-term external debt plus medium term amortisation. This is
expected to increase to around 160% in 2005, Fitch concluded.
Romanian economy rises 6.6% in first half
Romania's first-half gross domestic product increased 6.6% from a year earlier,
the government said recently, as construction services and industrial activity
all surged, New Europe reported.
It expanded 4.9% in both 2003 and 2002.
Construction gained 8.6%, services grew 6.5% and industrial output rose 5.9%.
Officials in the European Union candidate country have revised the economic
growth target to 6.5% from 5.5% and cut the budget deficit target to 1.64% of
GNP from 2.1%.
Romania's gross domestic product now totals 907.87 trillion lei, or US$26.8bn.
Officials have said that the economy must grow at more than 6% a year to catch
up with EU levels. But analysts have warned that Romania is at risk of
overheating, even as Bucharest tries to reduce inflation to 9% this year from
14.1% in 2003.
Ruhrgas and Gaz de France winners in gas tenders
Romania selected E.On-Ruhrgas and Gaz de France as winners in tenders for stakes
in gas distribution companies Distrigaz Nord and Distrigaz Sud, the two Romanian
gas distributions that account for 90% of gas deliveries in the country,
Evenimentul zilei daily reported recently.
According to a press release of the ministry of economy, Germany's Ruhrgas had
made a successful bid for a 30% stake in Distrigaz Nord, while Gaz de France
would take a 30% stake in Distrigaz Sud. The French and German companies would
take 30% stakes, which they would subsequently raise to 51% stakes via new share
issues, according to the terms of the deals.
The deals should be finalised by October or November, officials have said. The
two companies will negotiate during the following months the terms of taking
over the gas distribution sector in Romania.
According to a press release of the ministry of economy, following the
examination of the offers, the negotiating committees established that Ruhrgas
and Gaz de France obtained the highest score. Sources inside the gas sector said
that the bids offered for the pack of shares as well as the promises for future
investments made the difference in establishing the final score, noted the
Credit Suisse First Boston has been advising the government on the sell-offs.
E.ON Ruhrgas of Germany, Enel SpA of Italy, Wintershall of Germany, Gaz de
France and Gazprom of Russia submitted letters of interest in the privatisation
of Distrigaz Sud, and E.ON Ruhrgas, Enel, Gaz de France and Gazprom also
submitted letters of interest in the takeover of Distrigaz Sud.
All the companies having submitted the letters submitted non-binding preliminary
bids as of March 15th, 2004. The end of this privatising process brought a big
surprise along with the removal of the until then favourite Russian group
Gazprom, from the competition regarding the purchase of the Distrigaz Sud
company, analysts were quoted as saying.
Gazprom, the biggest natural gas supplier in Europe, made the lowest offer of
all four foreign companies that bid for Distrigaz Sud, the newspaper Ziarul
Financiar reported recently. Gazprom reportedly offered less than US$100m to
acquire 30% of Distrigaz Sud, while Gaz de France offered up to US$150m, the
Romanian newspaper reported, citing people familiar with the sale.
Romania is hoping to get at least US$120m for Distrigaz Sud and a minimum of
US$75m for Distrigaz Nord, the paper reported. Local media estimated the value
of Distrigaz Sud at about US$400m judging by its assets and that of Distrigaz
Nord, which has 1.3m customers, at over US$250m. Romania needs to reform its
energy sector as part of its bid to join the European Union in 2007 or 2008
along with Bulgaria and Croatia.
FOREIGN ECONOMIC COOPERATION
Romania, Serbia-Montenegro presidents discuss cooperation
While on a visit to Belgrade, Romanian President, Ion Iliescu, held official
talks with Svetozar Marovic, president of the Serbia and Montenegro Union, after
which the two presidents gave a media briefing, Radio Romania Actualitati
Stability, regional cooperation, and working jointly for EU membership - these
were three of the issues discussed in Belgrade by Romanian President Ion Iliescu
and Svetozar Marovic, president of the Serbia and Montenegro Union.
"One of Romania's and Serbia's strategic objectives is to reach out to
Europe. I wish to thank President Iliescu for the support offered to us in this
respect, and I hope we will have that support in the future as well. Romania's
experience is very useful for us, as Romania is already a candidate, one that is
to become an EU member in 2007," Marovic said.
In turn, President Iliescu referred to the concrete steps discussed, including
ways to counter the negative effects caused by the introduction of visas between
the two countries, after Romania signs the Schengen accord.
"We wish to simplify the procedures and make the visa-granting system more
flexible, introduce visas free of charge on both sides, increase the number of
personnel working at our consular offices, and open a new Romanian consulate in
Vrsac, but also to undertake joint demarches in Brussels to obtain technical and
financial assistance from the European Union to modernize the border-crossing
points," Iliescu said.
Raiffeisen unit gets EBRD credit
European Bank for Reconstruction and Development (EBRD) recently granted to
Raiffeisen Bank Romania a credit line, worth 10m, for financing small- and
medium-sized enterprises (SMEs), the two banks said in a joint statement.
Raiffeisen Bank will use the funds for granting credits up to 250,000 to
Romanian SMEs. The reimbursement periods for these loans are up to 10 years. In
another development Raiffeisen Bank Romania posted a 4.4m net profit at the
end of the first half of 2005 almost equal to the profit made throughout 2003,
the bank said, New Europe reported recently.
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