Romania Economic Monthly

8/12/2019 Romania Economic Monthly

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Romania Economic Monthly

August 2013

Economics

30 August 2013

CPI & key rate outlook

Source: INS, NBR, ING estimates

GDP projections

Source: INS, ING estimates

RON prospects

Source: NBR, ING estimates

Main developmentsFX reserves got a boost from EU funds in July, boding well for the RON.

Retail sales contracted in 2Q13, foreboding the slowdown in economic activity growth

for the period.

Retail sales slumped in May, likely foreshadowing a weaker 2Q13.

The NBR surprised with a bold 50bps cut, and left the door open for further cuts.

Real private sector wage growth dips to 10-year lows. This makes the recovery of

private consumption an even more distant prospect.

Industrial output back on track in June, but slowing in 2Q13.

Trade gap accelerates the cool-down in June, as fuel and manufactured products

continue to drive the adjustment.

Inflation dropped sharply in July - we now look for 2.6% inflation at the end of the year

and expect the easing cycle to end at 3.75% and include reserve requirements cuts.

2Q13 Flash GDP confirms expected slowdown, at odds with official comments.

The lending picture shows true colours, providing more ammunition for easing policy.

The dark side of the sharp c/a adjustment - from a gap of almost 4% of GDP in 2012,

the current account looks to be heading this year for a deficit of only 1% of GDP. This

favours the RON but paints a dark domestic demand picture.

Lending contracts further in June, offering more scope for monetary policy easing.

Forecast summary

(eop, except for GDP) 2010 2011 2012 2013F 2014F

EUR/RON 4.28 4.32 4.43 4.40 4.35

EUR/USD 1.34 1.29 1.32 1.20 1.203M ROBOR (%) 6.17 6.05 6.05 3.20 3.60

5Y bond yield (mid, %) 7.20 7.25 5.95 4.00 4.30

CPI (%YoY) 8.0 3.1 5.0 2.6 3.8

GDP (%YoY) -1.7 2.5 0.7 2.2 2.0

NBR key policy rate (%) 6.25 6.00 5.25 4.00 3.75

Source: National sources, ING estimates

Vlad MuscaluChief Economist, Romania

Bucharest +40 21 209 [email protected]

Mihai TantaruEconomist, Romania

Bucharest +40 21 209 1294

[email protected]

FINANCIAL MARKETS RESEARCH

research.ing.com SEE THE DISCLOSURES APPENDIX FOR IMPORTANT DISCLOSURES & ANALYST CERTIFICATION


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Romania: Monthly August 2013

2

Main developments

FX reserves got a boost from EU funds in Julyboding well for the RON.

July FX reserves jumped to 33.4bn versus 32.3bn at the end of June, likely receiving astrong boost from EU funds absorption.

Data released later during August showed payments from the European Commission

amounted to over 0.8bn in July, mostly due to 0.7bn structural programs refunds a

quite impressive figure which equals the 1H13 total. Our call did not incorporate this later

data, which explained almost entirely the difference from our 32.5bn July FX reserves

projection to the actual figures posted on 1 August. Therefore, we think the July numbers

are still consistent with our call for no FX interventions over the period, something which

is also warranted by the fairly quiet intraday activity in the FX space in July.

While the increase in FX reserves in July appeared as a clear RON positive, as NBR FX

coffers have not been as full since May 2012, the nature of the inflows had even more

positive implications. EU funds absorption potentially translates into improving liquidity

conditions, as the MinFin does not need to fund its expenditures from the market and

could use these inflows instead. EU funds-related expenditures of the MinFin add to

market liquidity like any public expenditures financed with unsterilized external capital.

Thus, we think these bode well for the RON outlook, as we believe improving liquidity

conditions leading to domestic debt advances currently stands as one of the major RON

positives.

Retail sales contract in 2Q13

foreboding the slowdown in economic activity growth for the period

We were looking for retail sales to reverse some of the sharp monthly drop from May and

expected a 1.5% seasonally-adjusted monthly advance in June, a call which would have

nonetheless seen retail sales contract in quarterly terms. However, the actual data was

bleaker, as the meagre 0.1% monthly advance in June does not make for a rebound,

while the May fall was revised lower to -3.2% from -3% previously. In quarterly terms,

retail sales decreased by 1.9% through 2Q13 - the largest drop since 4Q10. Notably,

weakness was spread across all components, foreboding the third sequential drop in a

row for final consumption expenditure in 2Q13.

While we stick to our view that we should see a potential revival of consumption when

real private sector wage growth returns into positive territory during 2H13 (on falling food

price inflation), any recovery of consumer appetite looks distant. The poor state ofdomestic demand is underlined by employment numbers, which posted a slowdown to

1.8% YoY growth in May vs. 2.1% in April and 3.1% average in 2012, also shining a light

on the weak demand-side pressure on inflation. This was another data point adding to

risks that the central bank rate-cutting cycle would go beyond our previous call for 100bps

in 2013-2014 (we currently think this cycle will extend to 150bps until 1Q13) .

NBR surprised with bold 50bps cutand left the door open for further cuts

In an unusually firm manner, the NBR cut the key rate at the 5 August meeting by 50bps

to 4.5%, the first of such magnitude after six 25bps cuts since 2010. In line with the

consensus call, we looked for the NBR to deliver another 25bps cut to its key rate.

Asked on the reasons for such an unexpected move, the NBR governor said the grounds

for this were laid by strong disinflation process which likely ensued from July and hinted

at 1% MoM drops in inflation in both July and August. The disinflation process is

EU structural funds

absorption amounted to over

0.7bn in July, equal to the

1H13 total

EU funds absorption

potentially translates in

improving liquidity

conditions

In quarterly terms, retail

sales decreased by 1.9% in

2Q13 - the largest drop since

4Q10

The recovery of the

consumer appetite looks

distant, as also underlined byemployment numbers

A stronger disinf lat ion

process than previously

thought by the Bank was the

main reason behind the

larger-than-consensus cut


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apparently stronger than previously thought by the Bank and this was also reflected in the

quarterly Inflation Report released after a couple of days. Furthermore, the governor also

pointed towards subdued demand-side pressures on inflation, despite the upgrade in

GDP growth projection (NBR sees 2013 growth exceeding 2%), as domestic demand will

take time to recover. The NBR also said the new SBA deal would likely shield Romania

from external market turbulences, but this was not expressed as one of main reasons for

the deeper-than-expected cut.

Interestingly, the governor termed the current minimum reserve ratios levels (15% for

RON and 20% for hard currency) as high and hinted at a gradual easing on this front, as

he acknowledged that key rate cuts take time (it was said 6 months) to feed a recovery of

credit markets. We have also expressed in favour of cuts in minimum reserve ratios as a

more direct way of unclogging the credit market from the mires of contraction and we now

think action on this front is more likely than not this year. Lending is in dire straits also

due to poor deposit growth so freeing some of the RON20bn for local currency and

5.5bn for hard currency required reserves held with the Bank should provide a boost to

credit markets.

Ahead of this meeting, we repeatedly highlighted the strong evidence in favour of policy

easing which had been gathering in the form of softening monthly activity numbers and

contracting credit numbers. These supported our call for at least 100bps of rate cuts this

year to 4.25% and we thought NBR firmer move will shift the consensus towards our call

(market expected the key rate at 4.5% by year end with no further cuts envisaged in

2014). However, despite the dovish guidance of the NBR, at that time we stuck to our call

for just another 25bps rate cut this year, as we were wary on inflation developments and

waited for more supply-side evidence to adjust our year-end CPI forecast.

Real private sector wage growth dips to 10-year lows

This makes the recovery of private consumption an even more distant prospect

When June retail sales were released, we argued that final consumption expenditure is

very likely to see the third consecutive quarter of sequential contraction in 2Q13 and the

wage figures are also pointing in the same direction. Wage growth continued to soften in

June to 3.5% in annual terms below our 4.2% call, from 5.3% in May, after averaging

5.6% in the first five months of the year and nearly 5% in 2012 and 2011.

Some of this weakness is explained by slowing annual growth of public sector wages

(due to base effects wearing off from the 8% increase in public sector wages in June

2012). These are now growing at only 10% YoY after averaging close to 17% since

December. However, the worrisome part of the June release stems from private sector

wage growth, which at 1.9% YoY, marks a new low of 10 years of data and is 1pp lower

than the average of the first five months of the year. In real terms, June private sectorwage growth equalled the -3.5% record low of the past 10 years.

At the time, we did not alter

our proj ections on the NBR

easing cycle

Wage growth continued to

soften in June to 3.5% in

annual terms

...while in real terms, private

sector wage growth equalled

the -3.5% record low of the

past 10 years


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Fig 1 Real private sector wage growth (% YoY) Fig 2 Employment expectations in the private sector

-10

-5

0

5

10

15

20

25

Jan-02

Jan-03

Jan-04

Jan-05

Jan-06

Jan-07

Jan-08

Jan-09

Jan-10

Jan-11

Jan-12

Jan-13

-30

-25

-20

-15

-10

-5

0

5

Jan-10

Jul-10

Jan-11

Jul-11

Jan-12

Jul-12

Jan-13

Jul-13

Services Industry

Source: NIS, ING estimates Source: DG ECFIN

Although we think private sector wage growth will outpace inflation in the coming months,

the negative surprise from the June data pushes the projected recovery of private

consumption even further in the future. Furthermore, coupled with a slowdown of

employment growth (to 1.8% YoY in May after averaging 3% over the previous 16

months since Jan 2012) and with recently worsening employment expectations in the

private sector, the latest wage data added to risks the central bank easing cycle would

extend beyond our initial call for 100bps in 2013-2014.

Industrial output back on track in Junebut slows for the 2Q13

When May industrial output numbers were published, we said such a sharp slowdown (-

10.7% initial figure, revised to -9.1% MoM - still the worst monthly contraction in more

than 13 years of comparable data) was likely to be a blip in the data, given that it felt at

odds with both the recent strong trend here and with output in other CEE countries and

the Eurozone.

June brought the confirmation of this, as industrial production bounced +5.7% over the

previous month in seasonally-adjusted terms. Annual growth surged to 7.6% in June,

above the 7% averaged during the first four months of the year, but following a fairly soft

0.5% growth in May. However, looking beyond short-term noise, the quarterly growth

figure marks a slowdown to 1.9% in 2Q13 after 2.6% in 1Q13. Together with contracting

retail sales in 2Q13, this data point added to evidence of slower economic activity in

2Q13 vs 1Q13, which flash data released later confirmed.

Slowdown of employment

growth and worsening

employment expectations in

the private sector add to poor

prospects of domestic

demand

June industrial production

bounced +5.7% over the

previous month

...but the quarterly growth

figure marks a slowdown to

1.9% in 2Q13 after 2.6% in

1Q13


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Fig 3 Industrial output recovers after odd drop

-10

-8

-6

-4

-2

0

2

4

6

8

Jan-08 Jan-09 Jan-10 Jan-11 Jan-12

Industrial output (%MoM, SA)

Source: INS, ING estimates

Looking ahead, sentiment data suggests industrial output may soften. We doubt a visible

deceleration is likely before year-end, especially as the euro area has returned to growth.

Base effect should turn more negative afterwards, as the start of production at the Ford

plan drops out of the annual comparison on industrial output.

Trade gap accelerates cool -down in June

Fuels and manufactured products continue to drive the adjustment

The June trade report shows the gap narrowed by over 60% from a year ago,

accelerating from c.50% in May and c.40% averaged over the first four months of 2013.

This translates into a 45% adjustment in 1H13 in annual terms, with the drivers behind

the positive trade gap adjustment still being fuels and manufactured products.

Fig 4 Contributions to trade gap adjustment in 1H13 vs 1H12 (% YoY)

-10

0

10

20

30

40

50

T

otal

Fue

l,

lubrica

nts,

etc.

Transport

equipment

andvehicles

Other

manufactu

red

products

Raw

materials

Food,

drinks

andtoba

cco

Chemicals

andsim

ilar

Source: NIS, ING estimates

A breakdown of the 1H13 trade data shows exports rose over 6% YoY for the period,

while imports fell by 2.4% in similar terms. As expected, manufactured goods (and

notably machinery transport equipment and vehicles) made for almost the entire export

advance, while on the other side, import contraction was even surpassed by the

contribution of the fuels category, which accounted for 4.4pp of the 2.4% decline for

1H13. While transport equipment and vehicles are expected to see similar trends further

ahead fuels imports contraction continues to be somewhat intriguing. After base effectsdue to harsher winter conditions in 1Q12 vs 1Q13 wore off, we think similar trends

followed in 2Q13 on the back of poor domestic demand. Our view is also supported by

Trade deficit narrowed c.45%

in 1H13 vs. 1H12

Similar trends are likley to

continue, with fuels and

machinery equipment dri ving

the adjustment


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the contracting fuels retail trade, with a 3.4% drop in seasonally-adjusted quarterly terms

in 2Q13 following after -7% growth figure in 4Q12 and -0.8% in 1Q13.

The still distant prospect of a recovery in private demand translates into continued

significant adjustments for the trade gap.

Inflation dropped sharply in JulyWe now look fo r 2.6% inf lation at the end of the year and expect the easing cycle to

end at 3.75% and include reserve requirements cuts.

July inflation came in at 4.4%, proving a positive surprise for most analysts (market

consensus was 4.8%) and an even larger one for ING (the ING forecast was 5.1%). The

fact that inflation slowed from 5.4% to 4.4% was somewhat hinted at a week before by

the NBR governor who said a fall of about 1ppt in the headline figure is likely.

Our forecast error stemmed largely from volatile food items. Vegetable prices dropped

about 13% on the month, while fruit cheapened by 4%. The disinflation was quite strong

in annual terms, as vegetable price increases slowed from 25% in the previous month to

10% by July, while fruit price growth eased from 13% to 6%.

We take this occasion to adjust our inflation projections, which have not been tweaked

since 4Q12. We originally had a worse view of volatile food prices, in spite of the

favourable base effect, and early spring data was hinting at softer and slower price

decreases across the food spectrum. The latest data has dissipated such expectations.

Additional downside pressure comes from the executives decision to lower VAT for

bread (from 24% to 9%, we momentarily assume about 50% of the cut will be passed to

consumers) as well as an even darker outlook for domestic demand, suggested by the

sharply narrowing current account gap.

The 12 August release of the 6M balance of payments figures showed the current

account recorded a surplus of 0.5% of projected GDP, miles away from the deficit of2.5% of GDP recorded in the same period of last year. We had placed our current

account projection for this year under review given the scale of the latest adjustment, but

now look for a gap of 0.8% of GDP after a deficit of almost 4% of GDP was seen in 2012.

Until this data point we had projected an adjustment towards a deficit of 3% of GDP. With

a market consensus of about 3.5% of GDP, the on-going domestic demand adjustment

may have not been fully priced-in.

We thus expect stronger disinflation, looking for inflation to end the year at 2.6% vs 4.6%

previously pencilled in. This opens the door for additional monetary easing which we

expect, judging by recent NBR action and comments, to be in the form of more rate cuts

and probably softer reserve requirements. We now see the current easing cycle ending at

3.75% in 1Q14 (vs 4.25% previously expected) and recent comments from the NBR have

come to suggest there are growing chances for a cut of the reserve requirement rate.

The near-term inflation data should bring more good news. We believe the headline will

shed 0.8ppt in August and more than 1ppt in September (thanks to the VAT cut for

bread), taking inflation very close to 2%.

This opens the door for more bold action at the upcoming rate-setting meeting (30

September) where we expect the NBR will deliver a 25bp rate cut coupled with a RON

reserve requirement easing or maybe just a 50bp cut. For the moment we favour the

former.

We now expect the key rate to hit 3.75% by February while an early August surveyreported a consensus of 4.50%. Should the market follow an outlook adjustment similar

to ours, this should have a visible impact on the domestic debt market. 3Y T-bonds could

follow 2Y papers in breaching their record lows (touched in May) and soon head for 4%.

At 4.4%, July in flation was

well below market consensus

(4.8%) or our call (5.1%)

Our forecast error stemmed

largely from volatile food

items

...something which coupled

with lower VAT for bread...

...and a sharply narrowing

current account gap outlininga dark outlook for domestic

demand...

...leads us to adjust our end-

year inflation p rojections to

2.6% vs. 4.6% previously

pencilled in

Also, we now expect the keyrate to hi t 3.75% by February


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2Q13 Flash GDP confi rms expected slowdown

at odds with o fficial comments.

Activity expanded in 2Q13 by 0.3% in seasonally-adjusted quarterly terms and 1.3% in

annual terms, after a 0.6% quarterly expansion in the previous quarter. The print matches

closely the outcome of a recent Reuters poll and was marginally better than our call as

we looked for a 0.2% expansion (which we said would be consistent with a 1.5%expansion).

The release offers nothing new as a slowdown was fairly clear judging by the already-

released monthly figures. Details of the GDP report will be released on 4 September and

most likely these figures will show that private consumption and investment were still

contracting in 2Q13, thus supporting our call of further sizeable monetary easing.

If anything, this release is at odds with the recent statement from the PM, which

commented in end-July that GDP growth was 2.4% in 1H13 while the flash GDP figures

show growth during that period was only 1.7%. Such a miss is likely to shape market

participants opinion on the recent quarrel between the government and the Fiscal

Council as the latter has expressed serious doubt regarding the revenue projectionsincluded in the recent budget rectification.

Lending picture shows true colorsproviding more ammunition fo r easing policy.

The ones focusing on headline private sector credit growth were in for a surprise as the

improvements in the June lending data (where the annual contraction eased to 1.3% from

more than 2% in the previous couple of months), was more than reversed with the July

figure (which showed a drop of -4.4%).

A good part of this worsening is the product of exchange rate influences and we compute

a credit dynamics index which limits the impact of such factors only to the weight of the

credit components. Our in-house index actually shows that the worsening has been

gradual, if slightly accelerating: May -1% in annual terms, June -1.3% and July -1.9%.

Still, the latest release is probably important as it shows to all the dire state of the lending

market, which is contracting by some 6% for the past six months in real terms.

Fig 5 Lending growth (in-house index)

-8

-6

-4

-2

0

2

4

6

8

Dec-09 Dec-10 Dec-11 Dec-12

Lending growth index (%YoY) Real lending growth index (%YoY)

Source: NBR, ING estimates

We note once more that we expect the NBR will deliver a 25bp rate cut to 4.25% at the

30 September meeting together with a marginal easing of local currency reserve

requirements.

GDP slowed to 0.3% quarterly

growth in 2Q13 from 0.6% in

1Q13

If anything, this release is at

odds with the recent

statement from the PM

Headline private sector credit

contracted 4.4% in annual

terms in July

Excluding most FX effects,

lending accelerated the

downfall to -1.9% in Ju ly vs. -

1.3% in June


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Romania

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013F 2014F 2015F

Act ivi ty

Real GDP (%YoY) 5.3 8.5 4.1 7.9 6.3 7.4 -6.6 -1.2 2.2 0.7 2.2 2.0 3.0

Private consumption (%YoY) 8.3 15.8 10.0 12.9 12.0 9.2 -10.5 -0.2 1.2 0.9 0.6 1.4 1.6

Government consumption (%YoY) 10.5 -9.9 2.2 -11.8 2.7 6.8 9.5 -13.6 0.3 2.3 2.5 1.2 1.5

Investment (%YoY) 8.7 11.0 15.3 19.9 30.3 15.8 -28.0 -2.0 7.3 5.0 1.6 7.8 5.5

Industrial production (%YoY) -0.8 1.5 -2.9 9.9 10.0 2.6 -5.4 4.8 7.6 2.8 3.4 4.5 6.0Unemployment rate year-end (%, SA, LFS) 6.8 8.0 7.2 7.3 6.4 5.8 6.9 7.3 7.4 6.8 6.7 6.6 6.4

Nominal GDP (RONbn) 197 247 289 345 416 515 501 524 557 587 630 670 730

Nominal GDP (bn) 53 61 80 98 125 140 118 124 131 132 143 152.27 169.8

Nominal GDP (US$bn) 60 76 99 123 171 206 165 165 183 169 180 183 212

GDP per capita (bn) 2,414 2,811 3,682 4,525 5,780 6,492 5,501 5,796 6,135 6,900 6,800 7,200 8,000

Gross domestic saving (% of GDP) 14.5 14.7 13.1 14.4 17.1 18.2 19.3 19.8 21.6 21.9 23.8 23.2 22.7

Non-government credit (% of GDP) 15.3 16.6 20.7 26.8 35.6 38.5 39.9 40.0 40.1 38.4 35.1 34.0 35.5

Prices

CPI (average %YoY) 15.3 11.9 9.0 6.6 4.8 7.9 5.6 6.1 5.8 3.3 4.3 2.8 4.2

CPI (end-year %YoY) 14.1 9.3 8.6 4.9 6.6 6.3 4.7 8.0 3.1 5.0 2.6 3.8 3.1

PPI (average %YoY) 18.6 19.3 16.5 6.7 6.4 12.7 2.5 4.4 7.1 5.4 5.5 6.2 6.0

Wage rates (%YoY, nominal, average) 25.4 22.5 23.7 16.8 21.0 22.9 7.7 1.8 4.9 4.9 5.3 4.4 7.5

Fiscal balanc e (% of GDP, ESA95)

Consolidated government balance (ESA 95) -1.5 -1.2 -1.2 -2.2 -2.9 -5.7 -9.0 -6.8 -5.6 -2.9 -2.9 -2.9 -2.7

Consolidated primary balance 0.1 0.2 0.1 -1.4 -2.2 -5.0 -7.5 -5.3 -4.1 -1.1 -0.9 -1.0 -0.9Total public debt (ESA 95) 21.5 18.7 15.8 12.4 12.8 13.4 23.6 30.5 34.7 35.8 38.0 40.3 42.1

External balance

Exports (bn) 15.6 18.9 22.3 25.9 29.5 33.7 29.1 37.4 45.3 45.0 47.7 49.1 50.8

Imports (bn) 21.2 26.3 30.1 37.6 47.4 52.8 36.0 44.9 52.7 52.4 53.5 55.0 57.0

Trade balance (bn) -5.6 -7.3 -7.8 -11.8 -17.8 -19.1 -6.9 -7.6 -7.4 -7.3 -5.8 -5.9 -6.2

Trade balance (% of GDP) -10.6 -12.0 -9.8 -12.0 -14.3 -13.7 -5.8 -6.1 -5.6 -5.5 -4.1 -3.9 -3.6

Current account balance (bn) -3.1 -5.1 -6.9 -10.2 -16.7 -16.2 -4.9 -5.5 -5.9 -5.0 -1.1 -1.7 -2.5

Current account balance (% of GDP) -5.9 -8.4 -8.6 -10.4 -13.4 -11.6 -4.2 -4.4 -4.5 -3.8 -0.8 -1.1 -1.5

Net FDI (bn) 1.9 5.1 5.2 9.1 7.2 9.5 3.5 2.2 1.8 1.6 1.3 1.6 1.8

Net FDI (% of GDP) 3.6 8.4 6.5 9.3 5.8 6.8 3.0 1.8 1.4 1.2 0.9 1.1 1.1

Current account balance plus FDI (% of GDP) -2.3 0.0 -2.1 -1.1 -7.6 -4.8 -1.2 -2.6 -3.1 -2.6 0.1 -0.1 -0.4

Foreign exchange reserves (ex gold, bn) 6.4 10.8 16.8 21.3 25.3 26.2 28.3 32.4 33.2 31.2 31.0 29.5 31.4

Import cover (months of merchandise imports) 3.6 4.9 6.7 6.8 6.4 6.0 9.4 8.7 7.6 7.2 7.0 6.4 6.6

Debt indicators

Gross external debt (bn) 17.8 21.5 30.9 41.2 58.6 72.4 81.2 92.5 98.7 99.2 101.1 108.2 111.1Gross external debt (% of GDP) 34 35 39 42 47 52 69 74 75 75 70.6 71.1 65.4

Gross external debt (% of exports) 114 114 139 159 198 215 279 247 218 220 211.9 220.4 218.6

Total debt service (bn, includes ST) 4.3 5.0 13.6 19.8 29.9 45.6 49.0 43.8 46.2 50.5 47.1 49.2 51.7

Total debt service (% of GDP) 8.1 8.1 17.0 20.2 24.0 32.6 41.5 35.2 35.2 38.3 32.9 32.3 30.5

Total debt service (% of exports) 27.3 26.3 61.0 76.6 101.3 135.1 168.6 117.1 102.1 112.2 98.7 100.2 101.7

Interest & exchange rates

Central bank key rate (%) year-end 21.25 17.00 7.50 8.75 7.50 10.25 8.00 6.25 6.00 5.25 4.00 3.75 3.75

Broad money supply (M2, %YoY) 23.3 37.1 36.5 28.1 34.0 17.3 8.3 6.1 6.3 4.6 7.4 6.3 7.1

3-month interest rate (ROBOR avg %) 19.9 20.7 9.8 8.8 7.8 13.0 11.7 6.7 5.8 5.3 4.3 3.3 3.7

3-year yield (avg %) 14.8 15.5 7.4 7.4 7.6 11.5 11.1 7.4 7.2 6.3 3.9 4.1 4.5

5-year yield (avg %) N/A N/A 7.3 8.1 7.5 10.6 10.8 7.3 7.3 6.5 4.0 4.2 4.6

Exchange rate (RON/US$) year-end 3.26 2.93 3.11 2.56 2.47 2.85 2.95 3.20 3.34 3.36 3.67 3.63 3.23

Exchange rate (RON/US$) annual average 3.32 3.26 2.91 2.81 2.43 2.50 3.04 3.17 3.04 3.47 3.49 3.67 3.44

Exchange rate (RON/) year-end 4.11 3.97 3.68 3.38 3.61 3.99 4.23 4.28 4.32 4.43 4.40 4.35 4.20

Exchange rate (RON/) annual average 3.76 4.05 3.62 3.52 3.34 3.68 4.24 4.21 4.24 4.46 4.40 4.40 4.30

Source: National sources, ING forecasts


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Disclosures AppendixANALYST CERTIFICATION

The analyst(s) who prepared this report hereby certifies that the views expressed in this report accurately reflect his/her

personal views about the subject securities or issuers and no part of his/her compensation was, is, or will be directly or

indirectly related to the inclusion of specific recommendations or views in this report.

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