EXECUTIVE SUMMARY
The report covers info as of March 11.

The key stories regarding Romania’s macroeconomics at this moment are the sustainability of the high growth rates (3.7% y/y in 2015) and the impact of the datio-in solutum bill – a bill under which banks customers could abandon the mortgage contracts with no further liability in addition to the collateral.

There is little doubt that there was the consumption that pushed up GDP last year.
Consumption has contributed 4pp to the GDP growth in 2015, while gross fix capital formation only 1.8pp. Consumption increased by 5.3% y/y in full 2015 and accelerated to 6.4% y/y in Q4. The investments have increased since 2014, when they decreased by 3.1% y/y, but they remain at a low level both in absolute terms and as a percentage of GDP compared to the pre-crisis peak of 2008.

Key Points

• Romania raises €1.25bn upon re-opening 10-yr, 20-yr Eurobonds
• Public debt to GDP ratio down 1.2pp y/y to 38.6% at end-2015
• GDP up 3.7% y/y in 2015, driven by consumption
• Net investments rise by 8.4% y/y in 2015 from low base
• Industrial growth eases to 2% y/y in Q4; 2.8% y/y in full 2015
• Construction works up 11.7% y/y in Q4; 10.4% up y/y in 2015 on maintenance, repair of roads
• Retail sales 15.6% y/y up in January; accelerates from 8.9%b y/y in 2015
• Headline inflation plunges to minus 2.1% y/y in January on VAT rate cut and further sinks into negative area to minus 2.8% y/y in February, on energy prices
• C-bank governor considers monetary policy tightening
• Wages surge by 11.1% y/y in Q4 and accelerates to 14.1% y/y in January
• Romania’s banks achieve €1.1bn net profits in 2015, on €82bn assets
• Banks' profitability above EU average despite high NPL ratio, c-bank finds
• PwC expects Romanian banks to sell €2.5bn of NPLs in 2016
• Overdue loans to banks ease by 18% y/y to €4.6bn at end-January
• EBA NPL drops to 13.6% at end-2015, 7.1pp down y/y
• Banks extend €843mn new loans in January, 31% up y/y
• BIS-reporting banks cut exposure to Romania by 3.2% of GDP in 4Q ending Sep-15
• FOB trade gap widens 59% y/y to 3.6% of GDP in 2015
• Exports shrink 1.6% by y/y, trade gap keeps widening in January
• Gross external debt down by 2.2% of GDP in 2015, after hike in 2009-2014