Current macroeconomic conditions in Romania at post-crisis best – CFA confidence poll

Current macroeconomic conditions in Romania at post-crisis best – CFA confidence poll
Confidence in macroeconomic conditions are at their highest point in the last year but there are expectations that business conditions will worsen / bne IntelliNews
By bne IntelliNews June 26, 2017

The Macroeconomic Confidence Index, calculated by Romania’s association of CFA members, increased by 5.8 points m/m to 66.6 in May (where 0 means no confidence and 100 full confidence), which is the highest value in the past 12 months, according to the monthly report issued by CFA (Chartered Financial Analyst) Romania on June 23. Analysts remain cautious regarding the future, however, though the current macroeconomic conditions have hit the highest post-crisis level.

The CFA Macroeconomic Index is based on a poll conducted by the CFA Romania association among its members, and represents an indicator that aims to quantify the expectations of financial analysts on economic activity in Romania for a time horizon of one year. The index ranges from 0 (no confidence) to 100 (complete confidence in the Romanian economy) and is calculated based on six questions regarding current conditions (of business and the labour market) and expectations about business, the labour market, the evolution of personal income and of personal wealth at the economy level.

The sub-index of current conditions went up 7.8 points m/m to 83.8, while the sub-index of expectations improved as well, by 4.7 points m/m yet remaining not far from the 50% neutral expectations though, at 57.9.

The poll indicated that there were expectations of a worsening of business conditions in next 12 months, from fairly good conditions at the moment. Thus, while 68.2% of those polled see the current business conditions as good (and 27.3 as neutral) resulting in a positive balance of 64points, the balance turns negative to minus 23points when it comes to future expectations: 2.7.3% are pessimistic and 68.2% are neutral.

On average, the analysts polled have not changed their expectations in regard to the exchange rate and inflation, since the last poll in April which was carried out before the political crisis that resulted in a weakening of the local currency. The analysts were expecting in May the local currency to depreciate against the euro in the following 12 months – but the currency has already weakened more than the depreciation envisaged by analysts within six months. The analysts estimate a median exchange rate of RON4.55 to the euro in the next six months and an exchange rate of RON4.6 for the next twelve months.

As regards future inflation, the average projection is 1.65% for the coming 12 months. Romania’s central bank slightly reduced its year-end inflation forecast by 0.1pp to 1.6% for 2017 and by 0.3pp to 3.1% for 2018, in the latest quarterly Inflation Report issued on May 15.

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