· Balance of payments deficit grows to 2.6 billion Euros in first five months
The balance of payments reached a deficit of 2.6 billion Euros in the first five months of the year, an increase of 757 million Euros compared with January-April 2016. In January-may 2015, the balance of payments ran a deficit of 42 million Euros. Long-term foreign debt was 69.935 million Euros as of 31 May 2016 (79/5% of the total foreign debt), 1.1% down on 31 December 2015. The rate of servicing long-term foreign debt was 27.7% in January-May 2016, compared with 35% in 2015. Coverage of imports of goods and services was 6.5 months on 31 May 2016, compared with 6.4 months on 31 December 2015. The coverage of short-term foreign debt calculated at the residual value with foreign currency reserves at the National Bank of Romania on 31 May 2016 reached 108.3% compared with 99.5% on 31 December 2015.
· Another year of low interest rates and cheap credit
Economic analysts are of the opinion that the three-month ROBOR level will resume its growth next year. The majority put forward a period of around twelve months in which interest rates will not increase and may even decrease. Growth in interest rates has been slowed down by deflation and despite the forecasts of the central bank it is possible that inflation will remain negative until the end of the year. Deflation, strongly supported by a large volume of imports, spoils the National Bank’s calculations and the chances of a strengthening of monetary policy. After the National Institute of Statistics announced inflation of minus 0.7%, many economists have revised their positions. Nevertheless, the elimination of the basic effect of reducing V.A.T. on food in 2015 can be seen in the evolution of inflation in June 2016, which fell to minus 0.7% from minus 3.5% in May. Corroborated by the effects of Brexit, which further complicates matters, the chances of the National Bank narrowing the interest corridor this year are starting to look slim. The massive liquidity of 10 to 11 billion lei the banks deposit in the National Bank monthly also diminishes the chances of an increase in interest rates this year.
· Additional state bonds up for auction
The Ministry of Public Finances has attracted 75 million lei from the banks, additional to the auction on 11 June, when it lent 500 million lei, through an issue of three-year bonds at an average yield of 1.65% per annum. Although the value of the additional issue was 75 million lei, the banks put in offers of more than 110 million lei. The ministry planned loans of 3.445 billion lei from commercial banks in July 2016, of which 3.2 billion lei came from seven auctions of treasury certificates and state bonds, and 255 million lei from supplementary sessions for non-competitive bids. The sums are earmarked for refinancing of the public debt and the state budget deficit.
· Head of the Monopolies Commission: Romania not ready for reintroduction of bilateral energy contracts
Romania is not ready for the reintroduction of bilateral contracts between energy producers and intermediaries, because the most important energy producers are state controlled, the head of the Monopolies Commission, Bogdan Chirițoiu, has declared. This declaration comes after suppliers and traders have repeatedly asked for the introduction of such contracts, which are believed to be the main reason why Hydroelectrica, Romania’s largest energy producer, made losses in the past and went into insolvency. After it went into insolvency in 2012, its contracts were annulled, and the companies with which it had signed the said contracts lost court cases against the measures taken by the liquidator. The introduction of bilateral contracts would allow the signing of agreements outside the stock exchange, without reference to the quantity or price of the energy, which would create uncertainty among producers and traders, leading to subsequent price increases.
· Developers required to make 20% of new homes affordable
As a condition of receiving building permits, the government wishes to impose a requirement that developers price twenty per cent of the homes they build at less than fifty thousand Euros. The measure is included in the National Homes Strategy now being drawn up by the Ministry of Development. The authors point out that agreements between private developers and local authorities are widespread throughout the world and do not deter private investment, but rather force developers to provide social housing.
· Consortium made up of EY and E3 Modelling PC wins tender for energy strategy
EY and E3 Modelling PC have won the tender to model the data that will form part of Romania’s Energy Strategy for 2016-2030. The process has not been finalised yet, since contestations can still be made. Should there be no contestations, the winner will be officially announced in the next few days. The Ministry of Energy received two bids for mathematical modelling of data obtained from the public consultation process involved in realising the Energy Strategy, the other having been made by the Institute for Energy Studies and Designs, Deloitte and Suciu, Popa și Asociații, and subcontractor National Institute of Research and Development in Energy. The value of the contract is around 1.87 million lei plus V.A.T.
· Ionuț Mișa, A.N.A.F.: “A billion Euros has been taken out of the country through transfer pricing”
According to Ionuț Mișa, head of the Large Taxpayers Department, the A.N.A.F. has inspected fourteen transfer pricing files in the first six months of this year and recovered for the state budget forty-four million lei from a retail company that was making purchases from affiliates at much lower prices than the going market rate and paying wages at an unjustified level. The Large Taxpayers Department deals with around 1,500 companies from all of the country, which account for around fifty per cent of the total revenues of the state consolidated budget,amounting to 233 billion lei (52 billion Euros) last year. “We have a transfer pricing analysis made by the Large Taxpayers Department at the end of 2014 in which we identified a supplementary sum totalling a billion Euros for large taxpayers alone. But back then the department covered 2,400 companies” explains Mișa. The head of the Large Taxpayers Department says that companies take money out of Romania through overpriced goods and services, management bonuses, and payments of millions of Euros to legal and tax consulting firms.
Sources: Agerpres, Profit.ro, Economica.net, Bursa, Adevărul, Ziarul Financiar, Capital
· JLL: Romania has joined the ranks of transparent markets for real estate investments
Real estate market transparency indices compiled since 2007 by consulting company JLL have included Romania for the first time this year, placing the country thirtieth out of the one hundred and nine markets analysed. The criteria that weigh heavily in favour of transparent market status include investment performance, market fundaments, legal regulations and framework, and the transactions process. Romania achieved its highest score for the transactions process, with 1.4 points, whereas Britain scored just 1 point, while Australia and Canada scored 1.3 and 1.6 respectively. Romania’s lowest score was for investments performance, with 3.8 points.
· UniCredit: strategic analysis of the financial situation for consolidation of strategic capital
The UniCredit board has approved the launch of a thoroughgoing strategic analysis of the bank’s financial situation, under new director general Jean-Pierre Mustier, with a view to consolidating capital and improving profitability. Mustier has the difficult task of increasing capital by billions of Euros and selling off assets. UniCredit shares fell by more than sixty per cent this year, because of investors’ fears regarding profitability, the high level of poorly performing loans, and a weak accounting balance sheet situation compared with other large European banks. All UniCredit assets will be examined and every opportunity to create money will be taken, including through sales. Strategic assets, such as German bank HVB, the Central and East European division, and the investment bank for companies will continue to be developed, however.
· Romania has fifth highest real estate price increases in Europe
With an average increase of 5.9% in the last six months, the local market is in fifth place behind Portugal, Germany, Turkey and Spain. At present, the average price in the residential sector has reached 900 Euros per square metre. Switzerland, France and Germany are the most expensive markets in Europe. Despite its fast price increases, Romania is still near the bottom of the league table when it comes to price per square metre.
· NEPI attracts more than 150 million in investments
New Europe Property Investments (NEPI), one of the largest real estate developers and investors in Romania, has managed to attract a share capital increase of more than 150 million Euros from shareholders. The sum will be used to finance acquisitions already made, as well as future purchases, including in Romania. NEPI recently announced that it has serious investment plans for Romania, with more than two hundred million Euros to be channelled into current projects. More than eighty per cent of the group’s activity is concentrated in Romania and its portfolio includes Mega Mall, Mall Promenada, Vulcan Value Centre, Shopping City Timișoara, City Park Constanța, Ploiești Shopping City, Brăila Mall, Galați Shopping City, Shopping City Tîrgu-Jiu, Severin Shopping Centre, Shopping City Deva, and other malls around the country.
· Hanner to develop Grivița Brewery
The Lithuanian Hanner Group has bought the Grivița Brewery site from Kiseleff Development, administered by Ionuț Dumitrescu, as part of a five million Euro deal, and intends to enter the office building market. The eleven-thousand-square-metre site in one of the Capital’s hottest properties. The development will involve restoration and conversion of historic buildings and new office and residential buildings. Hanner has invested more than 60 million Euros in three residential projects in Romania hitherto: The Park, Carol Park Residence, and City Residence. The company has more than a billion Euros in assets worldwide and has developed projects in Lithuania, Latvia, Russia, the Ukraine, Belarus and Romania, and has plans to expand to Germany and Britain.
· Paravion makes turnover of 27 million Euros
Online tourist agency Paravion made a turnover of 27 million Euros in the first quarter, 56% up on the same period last year. For the year as a whole, Paravion predicts a turnover of around 60 million Euros, an increase of around 43 million Euros on last year. The increase is thanks to consolidation of the agency’s position in the online markets in Romania and Turkey and in the plane ticket, holidays and hotels segment, with most of the volume of sales in Europe coming from Paravion’s English, Spanish, Italian, Greek, Bulgarian and Hungarian platforms, as well as expansion into new markets (the U.S.A. and South-East Asia). The biggest growth was in the plane tickets and hotels sectors, at fifty per cent and thirty-five per cent respectively. Paravion is the biggest online tourist agency in Romania by turnover.
· High rate of insolvencies reported for active companies
Romania is the country with the biggest fall in the number of insolvencies in Central and Eastern Europe in 2015, at around fifty per cent, and the favourable economic climate will encourage the trend in 2016, according to Coface, an international group specialising in credit insurance. Coface predicts a fall of four per cent in the number of insolvencies in Romania this year, although the rate of insolvencies in Romania is still among the highest in Europe. In 2015, the rate of insolvencies was 2.26% in Romania, compared with 0.04% in Poland and 0.96% in the Czech Republic. Only Serbia has a higher rate, at 4.05% in 2015. At the opposite end of the spectrum, the highest increase in the number of companies entering insolvency, at 20.8%, was recorded in the Ukraine, which has entered recession as a result of the conflict with Russia. The number of insolvencies fell last year in nine out of thirteen countries.
· Orange makes first 4.5G public test and Vodafone attacks the video content market
Telecom operator Orange has presented its 4.5G network with speeds of 1GB per second for mobile equipment, the first public test of its kind for a network in Romania, allowing live viewing of 4K films and videos. The 1GB per second speed will be achieved on a large scale throughout Romania from 2020, after significant investments in infrastructure. In 2015 the company announced an investment budget of 500 million Euros for the next three years, against a backdrop of explosive growth in data traffic.
Vodafone, the second largest player on the local mobile phone network, has taken its first step on the local video content market, launching its 4G TV mobile application, which offers customers (free of charge for the time being) access to around twenty live television stations and a series of films. The application aggregates HBO and Zongo content, but access to films and music is made through dedicated applications. The 4G TV app is now available in the Google Play store for mobile equipment using the Android operating system.
Sources: Bursa, Wall-Street, Curierul Național, Ziarul Financiar, Profit.ro