News

Daily Newsletter - 22 October 2021

Summary

Macroeconomic (3)
Financial (3)
Investment (3)
Legislative (1)
European News (1)
Social (2)
Macroeconomic 
High energy prices pose significant risk to inflation
Energy prices are expected to inch up in 2022 after surging more than 80% in 2021, fueling significant near-term risks to global inflation in many developing countries, the World Bank said in its latest Commodity Markets Outlook published on Thursday, 21 October. Energy prices should start to decline in the second half of 2022 as supply constraints ease, with non-energy prices such as agriculture and metals also expected to ease after strong gains in 2021.
Romania ranks fifth in the top of EU countries with the biggest government deficits in 2020
All EU member states ended 2020 with a deficit, but the highest values were recorded in Spain (11% of GDP), Greece (10.1% of GDP), Malta (9.7% of GDP), Italy (9.6% of GDP) and Romania (9.4% of GDP), according to revised data published by Eurostat on Thursday, 21October. These data, calculated based on the ESA methodology, also indicate that Denmark and Sweden were the only EU member states that had a government deficit below the 3% of GDP threshold set out in the Stability and Growth Pact, namely 0.2% of GDP and 2.8% of GDP respectively.
Non-performing loans rate could exceed 10%
The significant increase in prices is putting growing pressure on Romanians’ money and many of the 1.43 million Romanians with ongoing bank loans are most affected by the effects of inflation, according to an analysis by Frames consultancy firm and Cuculis & Asociaţii law firm. The stress tests conducted by the National Bank at the end of 2020 indicated, in a risk scenario, that the non-performing loans rate could reach 9.2% in December 2021 and 9.9% in 2022. In April, the NPL rate was 3.94%, above the 3.83% level recorded at the end of 2020. Since then, the economic situation has changed fundamentally. The chain price increases have generated growing financial pressure on the 1.43 million Romanians who have ongoing loans; therefore, NBR’s scenario seems outdated.
Financial 
NBR will further raise the key rate
OTP Bank analysts expect the National Bank of Romania (NBR) to further raise the key rate, after the increase operated in October. They believe a new increase will be announced by the end of the year and the monetary policy interest rate will exceed the 2% threshold in 2022. At the beginning of October, NBR increased the key interest rate from 1.25% to 1.5%, amid the rising inflation, much above expectations. The 0.25% increase in the monetary policy interest rate by the National Bank of Romania is the first step in a series of necessary key rate increments in order to balance the effects of the political crisis and the growing inflation, according to OTP Bank analysts.
NBR has published a draft regulation changing the lending conditions
The National Bank of Romania (NBR) has published a draft regulation changing the lending conditions for certain real estate investment loans. The down-payment, as well as the criteria used to calculate individuals’ maximum level of indebtedness would thus be modified. According to the aforementioned regulation, the value of a loan for real estate investments cannot exceed 75% of the value of the mortgage guarantee in the case of RON-denominated loans, compared to 85% in the past, and 65% for euro-denominated loans, and 50% for loans granted in other currencies.
UniCredit has been recognized by CFI.co as the Best Social Impact Bank in Europe in 2021
UniCredit has been recognized by Capital Finance International magazine (CFI.co) as the Best Social Impact Bank in Europe in 2021. For the second year in a row, the magazine has selected UniCredit as the leading institution for making a strong contribution towards positive social impact to support the real economy across Europe. The jury highlighted UniCredit’s commitment to a robust value system and significant efforts in integrating sustainability across its capital strategies.
Investment 
Agricost has finalized the EUR 65 million investment to open three alfalfa processing plants
Agricost, the biggest grains and oleaginous plants farm in Romania in terms of cultivated area, located on the Big Island of Brăila, has opened the third alfalfa processing plant this year. The project for the construction of the three plants from scratch amounted to EUR 65 million, and 165 people currently work in them.
Pet Star Holding has contracted a RON 20 million working capital loan
The company Pet Star Holding from Ialomiţa, the biggest PET preforms manufacturer in Romania, has contracted a RON 20 million working capital loan from EximBank, to finance the company’s everyday operations. The uncertainty generated by the coronavirus pandemic has had effects on Pet Star Holding’s activity, due to the quarantine imposed at certain countries’ borders and to the international transport difficulties. In order to prevent suspensions in the company’s usual production flow, Pet Star rapidly implemented an anti-crisis plan, having thus managed to consolidate its competitive position on the market.
Works for the consolidation of "George Enescu" National Museum will start on 25 October
Works for the consolidation, restoration and arrangement of "George Enescu" National Museum in Bucharest will start on 25 October, according to an announcement made by the Ministry of Culture on Thursday, 21 October. The investment amounts to EUR 5.5 million, VAT not included. In June, the Ministry of Culture signed a contract for the execution of works on the investment objective. According to the Ministry, the works will be financed from the loan granted by the Council of Europe Development Bank.
Legislative 
Association of Energy Suppliers expresses its concern over the latest form of OUG 118/2021
The Association of Energy Suppliers in Romania (AFER) expresses its concern that the latest form of the Government Emergency Ordinance (OUG) 118/2021 voted in the Senate and under debate in the Chamber of Deputies could lead to an artificial increase in selling prices on the wholesale market and to the absence of a quantity of energy from the market. AFER president Laurenţiu Urluescu believes that more extensive consultations with energy specialists are necessary before making decisions that will influence activity in the sector.
European News 
USA and EU voiced support for Western Balkan countries’ efforts to join the EU
The United States and the European Union voiced support on Wednesday, 20 October for Western Balkan countries’ efforts to join the EU but expressed concern about "increasingly divisive rhetoric" in Bosnia and Herzegovina. Serbia, Bosnia and Herzegovina, Montenegro, North Macedonia, Kosovo and Albania all want to join the wealthy 27-nation EU, but progress towards membership has been slow. In a joint statement almost a week after talks in Washington between EU foreign policy chief Josep Borrell and US Secretary of State Antony Blinken, the EU and the US government assured the Western Balkan states that they support EU enlargement.
Social 
National Federation of Parents does not agree with a new school holiday for all students
The National Federation of Parents does not agree with authorities’ proposal for a school holiday for all students starting from Monday, 25 October. Parents’ representatives believe that a holiday in the middle of the first school semester means a sudden interruption of students’ learning pace, which will practically cancel all the efforts made by teachers since the beginning of the school year. Moreover, the representatives claim that, by eliminating the online education option, the Ministry of Education condemns all students in Romania to ignorance, without any scientific basis and justification.
More than 99,000 people were vaccinated against COVID-19 on 20-21 October
The National Committee for the Coordination of Anti-COVID-19 Vaccination Activities (CNCAV) announced on Thursday, 21 October, that a total of 99,376 doses of Pfizer, Moderna, AstraZeneca and Johnson&Johnson vaccine had been administered on 20-21 October, of which 65,512 represented the first dose, 8,513 - the second dose and 28,351 - the booster dose. According to CNCAV, 11,485,084 doses of vaccine have been administered to 6,156,068 people since the beginning of the anti-Covid-19 vaccination campaign, on 27 December 2020. There are 5,778,190 fully vaccinated persons, and 630,136 people who have received the third dose.