The speed of economic recovery has slowed in recent months. Demand has recovered more quickly, while the source’s surprise is persistent. As a result, underlying inflation is expected to remain high for longer.
According to our internal ultra-high frequency index, economic activity reached 68% in the average month before the crisis in September, a slight improvement from 63% in August. The lowest point of activity was reached in April, when the economy was operating at about 27% of its capacity, and then increased sharply over the next 3 months, with mobility restrictions gradually lifted, reaching 60% of the pre-crisis average month in July. If the family call has reversed its contraction, it will probably take longer for the source to be completely.
Economic recovery is slowing due to supply-side constraints (very high-frequency rate of economic activity)
Since its introduction, our economic activity index has undergone several innovations to reflect economic situations of conversion. We advance the index of workplace situations with knowledge of Google Trends because knowledge from the Ministry of Labour eliminated knowledge. We excluded fuel intake, due to its maximum sensitivity to weather situations, some mobility indicators dropped, as they have become irrelevant once mobility restrictions were lifted, and included a proxy for external demand. Currently, our activity index includes six daily indicators: place situations in the labour market (derived from suspended/disrupted employment contracts enriched through Google Trends’ Pursuit of Unemployment Benefits), the activity rate of the German economy (calculated as an average between electricity intake and the number of kilometres traveled on toll trucks), electricity intake, air pollutant levels, BCR card transaction amounts, and mobility adjustments. in the workplace.
We reaffirm our forecast of an annual GDP contraction of -4. 7% in 2020, unchanged since the start of the Covid-19 crisis. budget deficit and avoid rating cuts, the EU recovery plan.
On the call side, the family entrance contracted strongly, through -13. 3% year-on-year, and slowed the expansion by -8. 1pp. On the source side, only the structure and ICT sectors definitely contributed to the expansion at the time of the quarter. there is a significant review of the data, Romania avoids a technical recession, explained as two consecutive quarters of sequential contraction.
Based on confidence indicators, our fast forecasting style suggests an expansion of single-digit GDP in sequential terms by 3. 20, after a contraction of -12. 3% t/t in 2Q20. anticipated, as the Economic Sentiment Indicator (ESI) rose through 15. 6 t/t emissions at 3-20, after falling to -32. 7 in 2K20. Confidence is in ups and downs, the more monthly profits have declined recently.
The industry’s recovery in Romania is slower than that of its peers, due to its more peripheral role in European price chains, the weaker bargaining force of Romanian exporters, and competitiveness disruptions for hand-intensive sectors. working.
The outlook for the production industry is not at all optimistic, as the recovery of new orders slowed in July, while the confidence indicator fell in September compared to last month, as the slow portfolio improvement was made up for an informed increase in inventories and a decrease in production expectations. In addition, production managers report capacity usage for the third quarter at a traditionally low point since it was reported in the European Commission survey (1Q01).
After rebounding sharply between May and July in monthly terms, retail sales in August went from -1. 6% m/m. As a result, the annual expansion rate of retail sales slowed to 2. 3% to/from August from 4. 5% to/to Despite weak printing in August, retail sales recovered faster than the production sector, suggesting that the call to surprise is short-lived relative to supply.
The August CPI remained below expectations at 2. 7% year-on-year compared to Bloomberg and Reuters median of 2. 8%. We expect inflation in NBR’s target diversity of 2. 5% ± 1 pp for the next eight-quarter policy horizon. .
Since the post-crisis recovery would possibly take longer than expected, given Romania’s budgetary constraints, resulting in greater patience from a negative production gap, the balance of dangers in the IPC’s medium-term trajectory is downward-oriented. Interest rates will gradually converge to regional standards, although a deviation from regional averages is expected to persist until dual deficits are corrected. It will most likely take time, keeping the exchange rate under pressure for the next 3 years. Given the relatively giant percentage weight of the exchange rate in the NBR’s reaction function, we believe that additional cuts in policy rates are highly unlikely.
Given that BNR has a preference for flexibility to react to imaginable currency weakness, liquidity control deserves to once again be the main operating instrument. ) for RON commitments, then ease liquidity control and perhaps convert the asymmetry of the Permanent Facilities Corridor. -Until the general elections, which are expected until the end of the year, they deserve to delay the adaptations of the financial policy.
We have revised upwards our nominal wage expansion forecast to 6. 5% in 2020, after 4. 4%, having been hit hard by the freezing period, wages have accelerated in recent months to 8. 1% to/a in July. The annual expansion rate is expected to halve by 2020-21 compared to 2016-2019, as most public sector pay increases under the unit payment formula have already been implemented in the past. At the same time, personal corporations are adapting their activities to the post-crown truth with a delay and expect slower wage expansion and higher unemployment.
The unemployment rate fell to 5. 3% in August, after 5. 4% in July, due to the accumulation of the working population and the fall in the number of standing. In December last year, the unemployment rate was 4%. the unemployment rate will rise in the coming quarters due to adjustments in the environment for personal corporations and a slow transition to more prudent public policies.
Political noise intensified before local elections (September 27) and general election (December 6), which led to short-term liquidation episodes in the background ROBBs. Despite the political backdrop, investor demand remained quite strong at most over time, driven by relatively high ROMGB returns. Investors seem to share S’s opinion
The NBR bond acquisition program remained relatively low at RON 3. 20 million to RON 748 million in July and RON 504 million in August. Global aversion to threats and idiosyncratic vulnerabilities that lead to pressure to depreciate RON can lead to higher short-term interest rates if the NBR adjusts. liquidity management. As a result, RON’s yield curve can simply be flattened due to the low front-end performance, a repayment of more than RON 9 billion is expected at the end of October to ease investment stresses.
MinFin issued RON 13. 4 billion on the domestic market in the 3W20 in ROMGB and 495 million euros in euro-denominated bonds. it exploited global markets with two dollar-denominated securities, promoting 10- and 30-year bonds and borrowing for $3. 3 billion. The government covered about 77% of its financing desires for the year, leaving around RON 30 billion in gross financing desires for the fourth However, 1 billion euros of the EU bailout budget is expected to be reduced by the end of the year and the giant currency financing cushion will restrict monthly issues to grades similar to those seen on average from the beginning of the year , which equates to RON 6. 3 billion.
The assets of non-ROMGB residents fell at the height of the crown crisis in the spring and remained strong thereafter. RON offshore government bond holdings 17. 5% in July at 21. 2% before the February crisis. GMRS’s yield curve changed in parallel with the drop at 3. 20, although it hardened slightly, with the spread between 10- and 3-year bonds expanding from about 10 bp to 50 bp.
Regardless of the final results of parliamentary elections, the new government embarks on a path of slow fiscal consolidation, constrained by the dangers of ratings reductions and the excessively high charge of financing public debt. The new executive is likely to disclose unpopular tax measures. The adjustment should be aimed at expanding tax revenues, given the higher percentage of uncompromising public spending.
Given that the RNR has a preference for flexibility to react to imaginable monetary weakness, liquidity control deserves to become the main operating instrument again. RRR) for RON commitments, then facilitating liquidity control and, in all likelihood, converting the broker’s asymmetry of permanent ease, keeping the key rate unchanged at 1. 50%. and the speed of fiscal consolidation looming. Political noise in the run-up to the general election, expected until the end of the year, deserves to delay financial policy adaptations. As a result, we expect GMRS’s returns to converge only gradually to ERC standards.
Rating Review: 23-oct – Moody’s, 30-oct – Fitch and 4-Dec – S
Download Romania’s Full Monthly Approach
America’s presidential election is too close to being called in the midst of a prolonged recount. President Trump said, “Frankly, we won the election,” which in a spiraling market amid fears of a contested election.
The EUR/USD pair extends the recovery to 1,1700 as us presidential elections are in the middle of the year. But it’s not the first time They’re increasingly contested. The U. S. dollar is losing floor in all domains. Concerns are observed about euro-domain coronaviruses and US statistics. But it’s not the first time
The GBP/USD pair fell to 1. 29 as the safe haven gained ground. Markets fear a long choice. The EU and the UK have agreed to conduct major brexit negotiations amid informed progress.
A recovery in the USD led to new gold sales on Wednesday. Political uncertainty forced investors to hedge their positions and supported the USD.
WTI describes an upgrade attempt at the height of a week. The API marked a wonderful inventory draw for the week that ended on October 30. Risks fluctuate amid combined clues about bluewave forecasts, Trump gives Biden a difficult fight.
Note: All data on this page is subject to change. Use of this is acceptance of our user agreement. Read our privacy policy and legal warning.
Trading currencies with margin carries a very dangerous point and may not be suitable for all investors. The maximum degree of leverage can play against you and also in your favor. Before making a decision on the currencies of the industry, it deserves to be taken into account in conscience. taking into account their investment objectives, their point of delight and their appetite for the threat. You may suffer the loss of all or part of your initial investment, so you deserve not to invest cash that you cannot lose. aware of all threats related to foreign exchange transactions and seek the recommendation of an independent monetary adviser in case of doubt.
The reviews expressed in FXStreet are those of individual authors and do not necessarily constitute the opinion of FXStreet or its management. FXStreet has not verified the accuracy or factual basis of any claim or has been made through an independent author: errors and omissions may occur. Any review, news, research, analysis, price or other data contained in this websiteArray through FXStreet, its employees, partners or collaborators, is provided as general market observation and does not constitute investment advice. FXStreet will not accept any liability for any loss or damage, including, without limitation, any loss of profits, which would possibly result directly or indirectly from the use or reliance on such data.