national bank of romania - bnro.ro si interviuri/e20050405.pdf · british-romanian chamber of...

BritishBritish--Romanian Chamber of Commerce Business BreakfastRomanian Chamber of Commerce Business Breakfast

National Bank of Romania Policy & RegulationsNational Bank of Romania Policy & Regulations and Investment in Romaniaand Investment in Romania

NATIONAL BANK OF ROMANIA

Bucharest, 5 April 2005Bucharest, 5 April 2005

NATIONAL BANK OF ROMANIANATIONAL BANK OF ROMANIANATIONAL BANK OF ROMANIA





OutlineOutline

•• State of the EconomyState of the Economy•• GDP Growth, Credit Growth & InflationGDP Growth, Credit Growth & Inflation•• External Accounts & Cap Acct LiberalizationExternal Accounts & Cap Acct Liberalization•• Exchange Rate DevelopmentsExchange Rate Developments•• Interest Rate DevelopmentsInterest Rate Developments

•• Preparations for the Introduction of Preparations for the Introduction of Inflation TargetingInflation Targeting

•• A PostA Post--Accession PerspectiveAccession Perspective





2000 2001 2002 2003 2004 2005f

2.1

5.76.0

8.3

5.25.1

annual percentage change

Real GDP

Source: National Institute of Statistics, Pre-Accession Economic Programme

2004: investment up 10.1%; private consumption up 10.8%





Domestic Demand

0

3

6

9

12

2000 2001 2002 2003 2004Source: National Institute of Statistics, National Bank of Romania

domestic demandfinal consumptiongross fixed capital formationGDP

yoy percentage change

-4

0

4

8

12

2000 2001 2002 2003 2004-4

0

4

8

12net exportsfinal consumptiongross fixed capital formationGDP (right-hand scale)

percentpercentage points

Contribution of Main Components of Demand to GDP Growth





5.5

10.1

8.2

9.110.1

2000 2001 2002 2003 2004

Source: National Institute of Statistics; National Commission of Prognosis

Gross Fixed Capital Formation

percentage change against the same period of previous year





7.1

8.4

6.0

3.2

5.3

8.5

2000 2001 2002 2003 2004 2005Jan.

Source: National Institute of Statistics

Industrial Outputpercentage change against the same period of previous year





Total Credit and Non-Government Credit

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000Ja

n.00

Jul.0

0

Jan.

01

Jul.0

1

Jan.

02

Jul.0

2

Jan.

03

Jul.0

3

Jan.

04

Jul.0

4

Jan.

05

Source: National Bank of Romania, National Institute of Statistics

defla

ted

by C

PI, D

ec. '

99=1

00

foreign exchange-denominated creditROL-denominated credittotal credit, net

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

Jan.

00

Jul.0

0

Jan.

01Ju

l.01

Jan.

02

Jul.0

2

Jan.

03

Jul.0

3Ja

n.04

Jul.0

4

Jan.

05

ROL billions

to private companiesto other private entities (incl. households)to state-owned companies

(in real terms)ROL billions





0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

100,000

Jan.

00

Jul.0

0

Jan.

01

Jul.0

1

Jan.

02

Jul.0

2Ja

n.03

Jul.0

3

Jan.

04

Jul.0

4

Jan.

05

defla

ted

by C

PI, D

ec. '

99=1

00 companieshouseholds

ROL-denominated credit

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

100,000

Jan.

00Ju

l.00

Jan.

01Ju

l.01

Jan.

02Ju

l.02

Jan.

03Ju

l.03

Jan.

04Ju

l.04

Jan.

05

companieshouseholds

foreign exchange-denominated credit

Non-Government CreditROL billions ROL billions

(in real terms)






Inflation Rate

45 35 27 25 22 14 9 7 4

40.6

54.8

40.7

30.3

17.8

14.1

9.3

0

10

20

30

40

50

60

1998 1999 2000 2001 2002 2003 2004 2005f 2006f

Source: National Institute of Statistics, Pre-Accession Economic Programme

Dec./Dec.

0

10

20

30

40

50

60

target actual

Feb.’05 12-month CPI inflation: 8.9%





Inflation Rate

0

5

10

15

20

25

30

35

Jan.

02

Apr

.02

Jul.0

2

Oct

.02

Jan.

03

Apr

.03

Jul.0

3

Oct

.03

Jan.

04

Apr

.04

Jul.0

4

Oct

.04

Jan.

05


CPI; percentage change against the same period of previous year





Inflation Rate

-10

0

10

20

30

40

50

60Ja

n.00

Apr

.00

Jul.0

0

Oct

.00

Jan.

01

Apr

.01

Jul.0

1

Oct

.01

Jan.

02

Apr

.02

Jul.0

2

Oct

.02

Jan.

03

Apr

.03

Jul.0

3

Oct

.03

Jan.

04

Apr

.04

Jul.0

4

Oct

.04

Jan.

05

percentage points

-10

0

10

20

30

40

50

60

Source: National Institute of Statistics, National Bank of Romania calculations

free prices not including prices for seasonal products (weight in total growth)prices for seasonal products (weight in total growth)administered prices (weight in total growth)annual inflation rate (left-side scale)

CPI; percentage change against the same period of previous year





-6.0

-7.5

2003 2004

Current Account Balance/GDP*percent

*) according to the new methodology, including reinvested profitSource: National Bank of Romania, National Institute of Statistics, National Commission of Prognosis





Current Account Financing via FDI

505

–4,402–3,060

1,910

4,042188

-5,000

-4,000

-3,000

-2,000

-1,000

0

1,000

2,000

3,000

4,000

5,000

2003 2004

Source: National Bank of Romania

capital transfersdirect investmentcurrent account deficit

EUR millions

Current account financing via FDI (including capital transfers) up 103.3% in 2004 against 68.6% in 2003





Openness of the Economy*

70.774.5 76.4

79.883.5

2000 2001 2002 2003 2004


percent

*) (imports + exports)/GDP





Trade Balance

-1,000

-500

0

500

1,000

1,500

2,000

2,500

2000 2001 2002 2003 2004 2005Feb.


-1,000

-500

0

500

1,000

1,500

2,000

2,500

exports fob imports fob trade balance

EUR millions(monthly data)

EUR millions





Foreign Trade by Group of Commodities

0%

20%

40%

60%

80%

100%

2003 2004 2005* 2003 2004 2005*


0%

20%

40%

60%

80%

100%textiles, wearing apparel,footwear

base metals

mineral products

machinery, equipment andtransport means

chemicals and plasticmaterials

other

Exports Imports

In 2004, export growth rate of machinery, equipment and transport means was 11.8 pp higher than total export growth rate (21.3%); share of imports thereof in total imports rose from 30.1% to 33%.

*) Jan.





Source: Trade Register

tourism2%

transport7%

industry56%

construction2%

agriculture1%

retail trade7%wholesale trade

8%

professional services

17%

Foreign Equity in Joint-Stock Companies in Romaniaby Sector*

*) at end-February 2005





Gross International Reserves

0

2

4

6

8

10

12

14

1620

00

2001

2002

2003

2004


2005

Jan

banks' foreignexchange reserves

NBR foreignexchange reserves

gold

EUR billions

Gross Official Reserves

0

2

4

6

8

10

12

14

16

2000

2001

2002

2003

2004

2005

Apr.1

NBR foreign exchangereserves

gold

EUR billions





External Debt Indicators

1.72.1

2.93.5

2.8 2.9

4.2 4.1

8.0

6.8 7.06.4 6.4

4.8*

3.4

4.75.2*5.2

3.6

5.5

0

2

4

6

8

10

12

1999 2000 2001 2002 2003 2004 2005Mar.

Source: National Bank of Romania, Ministry of Public Finance

official foreign exchange reserves - months of goods-and-services imports

official reserves - months of goods-and-services imports

public and publicly guaranteed debt - months of goods-and-services exports

months

*) based on prospective goods-and-services imports





Spread of Romania's Eurobonds 2008, 2010 & 2012

0

100

200

300

400

500

600

700

800

900Ju

l.01

Sep.

01

Nov

.01

Jan.

02M

ar.0

2

May

.02

Jul.0

2

Sep.

02

Nov

.02

Jan.

03

Mar

.03

May

.03

Jul.0

3

Sep.

03

Nov

.03

Jan.

04

Mar

.04

May

.04

Jul.0

4

Sep.

04

Nov

.04

Jan.

05M

ar.0

5

Source: Bloomberg

3

4

5

6

7

8

9

10

11

12spread (2008)

spread (2010)spread (2012)

yield (2008)

yield (2010)yield (2012)Sp

read

vs.

Bun

ds (b

p

Yiel

d (%

)

Note: Romania '08 was 592 bps over Bunds at launch and 54 bps on Apr. 4 '05 Romania '10 was 271 bps over Bunds at launch and 64 bps on Apr. 4, '05 Romania '12 was 365 bps over Bunds at launch and 63 bps on Apr. 4, '05





1998: liberalization of current account operations1998: liberalization of current account operations (Art. VIII of IMF Articles of Agreement)(Art. VIII of IMF Articles of Agreement)1999: liberalization of medium1999: liberalization of medium-- and longand long--term capital inflowsterm capital inflows2001: schedule of capital account liberalization2001: schedule of capital account liberalization

Liberalization of capital flows with significant impact on the balance of payments

Liberalization of Liberalization of capital flows with capital flows with low impact on low impact on the balance of the balance of paymentspayments

Liberalization of Liberalization of capital movements capital movements consisting of consisting of transfers in transfers in performance of performance of insurance contracts insurance contracts and other capital and other capital flows with flows with significant impact significant impact on the real sectoron the real sector

*) including operations in units of collective investment undertakings

direct and realdirect and real--estate investment by residents abroadestate investment by residents abroadadmission to quotation of national securities* on foreign capitadmission to quotation of national securities* on foreign capitalalmarketsmarketscollateral granted by foreigners to residentscollateral granted by foreigners to residentspersonal capital movementspersonal capital movementsmediummedium-- and longand long--term loans related to commercial transactions term loans related to commercial transactions

ororservices granted by residents to nonservices granted by residents to non--residentsresidentscapital transfers in performance of insurance contractscapital transfers in performance of insurance contracts

20042004

at latest at latest upon upon accession accession to EUto EU

20012001--0202

20032003

residentsresidents’’ transactions in foreign securities* transactions in foreign securities* financial borrowings and loans with maturity less than 1 yearfinancial borrowings and loans with maturity less than 1 yeargranted by foreigners to residentsgranted by foreigners to residentsfinancial borrowings and loans granted by residents to foreignefinancial borrowings and loans granted by residents to foreignersrscollateral granted by residents to foreignerscollateral granted by residents to foreignersadmission to quotation of foreign securities* on domestic capitaadmission to quotation of foreign securities* on domestic capitallmarketsmarkets

operations in ROLoperations in ROL--denominated deposit accounts opened by denominated deposit accounts opened by foreigners with resident financial institutions (foreigners with resident financial institutions (schedsched. for 2005 H1). for 2005 H1)

operations in securities and other open market instrumentsoperations in securities and other open market instrumentsoperations in current and deposit accounts opened by operations in current and deposit accounts opened by residents abroadresidents abroad





Nominal Exchange Rate

17,00019,00021,00023,00025,00027,00029,00031,00033,00035,00037,00039,00041,00043,000

Dec

.99

Jun.

00

Dec

.00

Jun.

01

Dec

.01

Jun.

02

Dec

.02

Jun.

03

Dec

.03

Jun.

04

Dec

.04


17,00019,00021,00023,00025,00027,00029,00031,00033,00035,00037,00039,00041,00043,000

ROL/USDROL/currency basket (75% EUR+25% USD)ROL/EUR

(daily data)

Note: until end-December, 2003, the currency basket was 60% EUR+40% USD

NBR's decision to pursue a more flexible exchange rate





Real Exchange Rate of the ROL against the EUR

40

60

80

100

120

140

160D

ec.9

8

Mar

.99

Jun.

99Se

p.99

Dec

.99

Mar

.00

Jun.

00Se

p.00

Dec

.00

Mar

.01

Jun.

01Se

p.01

Dec

.01

Mar

.02

Jun.

02Se

p.02

Dec

.02

Mar

.03

Jun.

03Se

p.03

Dec

.03

Mar

.04

Jun.

04Se

p.04

Dec

.04

index, December 1998 = 100 monthly averagesbased on CPI differential between Romania and Euro areabased on PPI differential between Romania and Euro areabased on ULC in industry

Source: National Bank of Romania, National Institute of Statistics (National Bank of Romania calculations), International Financial Statistics





Real Wage and Labour Productivity in Industry

-15

-10

-5

0

5

10

15

20

2000 2001 2002 2003 2004 2005*


labour productivity

gross real wage, based on PPI for domestic market

percentage change against the same period of previous year

*) Jan.





-4.0

-3.2

-2.5-2.3

-1.1

2000 2001 2002 2003 2004

Source: Ministry of Public Finance, National Institute of Statistics

General Government Deficit /GDP*percent

*) adjusted to IMF methodology





Source: National Bank of Romania, Ministry of Public Finance

MLT External Debt

0

2

4

6

8

10

12

14

16

18

20

2000

2001

2002

2003

2004

public and publicly guaranteeddebt private debt

EUR billionsTotal External Debt

0

2

4

6

8

10

12

14

16

18

2020

00

2001

2002

2003

2004

*) majority private debt

MLT debt ST debt*

EUR billions





Inflation Rate and Interest Rates

5

15

25

35

45

55Ja

n.01

Jul.0

1

Jan.

02

Jul.0

2

Jan.

03

Jul.0

3

Jan.

04

Jul.0

4

Jan.

05


percent

inflation rate (percentage change against the same year-earlier period)

NBR interest rate on sterilization operations(% p.a.)

5

15

25

35

45

55

Jan.

01

Jul.0

1

Jan.

02

Jul.0

2

Jan.

03

Jul.0

3

Jan.

04

Jul.0

4

Jan.

05

percent

inflation rate (percentage change against the same year-earlier period)average interest rate on ROL-denominatedloans of non-gov't, non-bank clients (% p.a.)deposit rate (time deposits; % p.a.)

Gradual small cuts in policy rate by 675 bps (June 2004 - March 2005) against 3.4 pp decline in yoy inflation rate





Preparations for the Introduction of Preparations for the Introduction of Inflation Targeting Inflation Targeting

•• Eclectic regime at present: inflation Eclectic regime at present: inflation targeting targeting ““lightlight””

•• Internal PreparationsInternal Preparations•• Organizational ChangesOrganizational Changes•• Data Management, Surveys, NearData Management, Surveys, Near--Term Term

Forecasting, MediumForecasting, Medium--Term ModelTerm Model•• Transparency & Communication: The New QIRTransparency & Communication: The New QIR

•• Specifications of Full IT RegimeSpecifications of Full IT Regime





A Post-Accession PerspectiveTiming of ERM2 entry (3Timing of ERM2 entry (3--4 years after accession)4 years after accession)should be chosen so as to:should be chosen so as to:

provide some monetary and exchange rate flexibility in order to provide some monetary and exchange rate flexibility in order to further further necessary and substantial structural adjustmentnecessary and substantial structural adjustmentmaintain motivation to carry out reforms in a timely manner and maintain motivation to carry out reforms in a timely manner and consolidate macro disciplineconsolidate macro disciplineabsorb most of convergence play inflows and allow further progreabsorb most of convergence play inflows and allow further progress in ss in nominal and real convergence nominal and real convergence

Timing configured to ensure Timing configured to ensure ex anteex ante likelihood of shorter likelihood of shorter necessary stay in ERM2, considering:necessary stay in ERM2, considering:

credibility provided by final stage of the process (adoption of credibility provided by final stage of the process (adoption of the euro) the euro) and attendant spurring of adjustmentand attendant spurring of adjustmentpossible volatile capital movements amid restricted exchange ratpossible volatile capital movements amid restricted exchange rate e flexibility during interim periodflexibility during interim period

Euro adoption expected in 2012Euro adoption expected in 2012--2013 2013

national bank of romania - bnro.ro si interviuri/e20050405.pdf · british-romanian chamber of...

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