The first part of a review of Romania's economic development in 2016.
In the first three quarters of the year,
Romania's economy grew by 4.9% against the same period of 2015, the highest in
the European Union, and the premises are in place for the fourth quarter to
hold to the trend. Also, according to European Commission figures, Romania's
economy grew by 5.2% this year, while the IMF estimates the growth rate at 5%.
After the first 10 months, the National Institute of Statistics estimates the
budget deficit at 0.17% of the GDP, with a deficit no higher than 2.8% of the
GDP by the end of the year, according to the government. The National Bank in
November maintained its forecast for inflation at minus 0.4%.
2016 started with savings for
consumers of goods and services as the reduction in VAT came into effect,
bringing it down to 20% from 24%, in some cases to 9%, or even 5%. Electricity
fees went down by 5 to 6%. The dividend tax was also reduced to 5%, but other
taxes, such as the mandatory car insurance and property taxes went up. The VAT
getting slashed was by far the most important fiscal move of the year, leading
to a general drop in prices. At the same time, starting on 1st
January, taxes were reduced from 9% to 5% for cinemas, museums, book
deliveries, textbooks, newspapers and magazines, as well as sports and cultural
events. A 9% VAT rate was also applied for medication, hotels, food,
restaurants and catering, as well as running water.
On January 4th, Banca
Transilvania, a majority Romanian capital bank, announced it had completed the
process of merging through absorption with Volksbank, resulting in around 10%
of the 2.2 million customers of the now mother bank coming from Volksbank, as
well as 400 of its 7,300 employees. Banca Transilvania ranks third in the
Romanian banking system in terms of assets, after BCR and BRD, competing with
BRD for second place after the merger.
The Board of Administrators of the
National Bank of Romania decided on January 7th to maintain the
reference interest rate at 1.75%, which remained the same for the entirety of
The EBRD announced on 11th
January it would grant an 8.5 million dollar loan to Belgian aerospace company
Sonaca for its plan to expand to Romania. This loan was towards the company
building a factory in the north west of Romania, meant to manufacture wing
components for aircraft makers such as Airbus and Embraer. It was announced
that the factory would be built in two years, placed around 30 km away from the
city of Cluj, the second most populous city in the country, with a highly
trained labor force.
Fitch Ratings confirmed once again,
on January 23, that its rating for Romania was BBB minus for long term loans in
international currency, and BBB in the local currency, with an expectation the
rating would remain stable. According to Fitch, Romania's ratings are supported
by more robust economic prospects, a better fiscal position, as well as
governance indicators more favorable than in other BBB rated states. However,
the agency pointed out that the tax slashes announced for 2016 and 2017 present
On January 28th, Albalact
Alba Iulia shareholders approved an agreement with Lactalis under which the
French group took over the largest dairy maker in Romania.
On February 19, Romania borrowed 1.25
billion Euros on international financial markets, reopening two Eurobond issues
launched in October 2015, issues that mature in 2025 and 2035. According to the
Romanian Finance Ministry, upon reopening the interest rate was brought down
for the 10 year bonds, from 2.84% to 2.55%, as well as for the 20 year bonds,
from 3.93% to 3.9%, reaching historical lows.