NATIONAL BANK OF ROMANIA. Romania s Balance of Payments and International Investment Position

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2 NATIONAL BANK OF ROMANIA Romania s ANNUAL REPORT

3 Note The drafting of Annual Report Romania s was completed by the Statistics Department based on data available at end-november Some of the data are provisional and will be updated as appropriate in subsequent NBR publications. Sources of data are mentioned when institutions other than the National Bank of Romania supplied data. All rights reserved. Reproduction for educational and non-commercial purposes is permitted provided that the source is acknowledged. National Bank of Romania 25 Lipscani St., , Bucharest Romania Phone: 40 21/ ; Fax: 40 21/ ISSN (print) ISSN (online)

4 Methodological notes The Annual Report Romania s was prepared in line with the new international methodological standard on balance of payments and international investment position compilation, as shown in the IMF s and International Manual, 6th edition (BPM6), which replaced the former BPM5 compilation methodology. Details on the main methodological changes are presented in the Statistics section on the NBR website, i.e. in the document entitled Implementing the new methodological standards in the NBR s statistics (Romanian only). In order to ensure the comparability of data, monthly and quarterly historical data series as of 2005 have been transposed into the BPM6 compilation methodology and are available in the Interactive database under the Statistics section on the NBR website. Detailed methodological notes on the definitions, legislation and data sources are available on the NBR website in the Statistics section, Data sets, External Sector Indicators or by accessing the following link: Balance of payments Methodology.

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6 Contents MAIN DEVELOPMENTS IN I. External environment... 7 II. Romania s balance of payments and international investment position in A. Balance of payments Current account Balance on goods and services Balance on trade in goods Structure and geographical breakdown of exports Structure and geographical breakdown of imports (FOB) Energy trade balance Balance on trade in services Balance on primary income Balance on secondary income Capital account Financial account Direct investment Portfolio investment Other investment B. Romania s international investment position Overview International investment position Foreign assets Foreign liabilities External debt Statistical Section... 45

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8 Romania s I. External environment 1 During, the international economic environment was characterised by fluctuations and mixed developments across countries. The beginning of the year saw the continuation of world economy recovery that had started in the final quarter of 2012 and that was observed chiefly in the advanced economies. In the summer of, financing conditions on world markets became tighter, global demand subsided and came to affect the emerging economies in particular. Subsequently, a gradual recovery was manifest, especially in the advanced economies, but their prospects were further restrained by the process of balance sheet repair, fiscal consolidation, relatively tight credit conditions and weak labour markets. Across the large emerging economies, growth continued to be slowed down by structural causes, although it remained faster than in the advanced economies, making a significant contribution to global growth. These adverse conditions were fuelled by social unrest and geopolitical tensions in a number of Middle Eastern and North African countries, taking the rate of increase of global production to 3 percent, from 3.2 percent in Therefore, global trade in goods and services was characterised by moderate and volatile growth, edging however 3 percent higher, compared with 2.8 percent in the previous year. Average annual inflation rate 2 remained on a downward path, touching 1.6 percent, from 2.2 percent in 2012, given the underutilisation of production capacities, high unemployment and subdued economic activity worldwide. Brent oil price remained high, on average, at a level comparable to that recorded in the past two years (more than USD 110 per barrel), but stable, amid the modest growth of world economy, the rise in oil production in the United States of America and lingering geopolitical tensions in the Middle East and North Africa. Commodity prices 3 went down 4.9 percent during (grain prices in particular), after having risen by 2.6 percent in the previous year. Euro area economy 4 shrank by 0.4 percent in, compared with -1.5 percent in The contraction was driven by investment and private consumption, the performance of which was affected by tight credit conditions, still low capacity utilisation and a reduction in employment rate. Nevertheless, the decline in investment was less pronounced, reaching -2.9 percent in from -4 percent a year earlier, thanks to favourable developments seen also in the construction sector. Similar developments saw private consumption, which fell 0.7 percent in, against -1.3 percent in 2012, reflecting less tight financing conditions and lower commodity prices. Following the continued efforts to achieve fiscal consolidation by most euro area members, government consumption moved ahead merely 0.1 percent, after having contracted by 0.6 percent in the prior year Source: ECB, Annual Report, Monthly Bulletin, October 2014; IMF, World Economic Outlook, October For the countries that are members of the Organisation for Economic Co-operation and Development (OECD). Expressed in EUR and based on the GDP-by-expenditure weighting system (energy excluded). The countries referred to herein are the 17 EU Member States making up the monetary union at end-: Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Malta, the Netherlands, Portugal, Spain, Slovakia and Slovenia. National Bank of Romania 7

9 Romania s Main developments in Net exports of goods and services were the only component that had a positive contribution to euro area economic growth, even though export dynamics slowed as compared with the previous year. In, euro area exports of goods and services expanded by 1.4 percent and imports thereof by 0.4 percent, after having risen by 2.5 percent and fallen by 0.9 percent respectively in From a sectoral perspective, negative real GDP growth in the euro area stemmed from the developments in construction, industry and services. Gross value added in the construction sector slipped 4 percent year on year, while services and manufacturing reported negative growth rates of 0.5 percent and 0.6 percent respectively. Against the backdrop of weakening inflationary pressure induced by international food and energy prices, the average annual inflation rate measured by the Harmonised Index of Consumer Prices (HICP) decreased to 1.4 percent in from 2.5 percent in the year before. The labour market in the euro area remained on the downward drift that had become manifest in 2011 H2, with the employment rate shedding 0.8 percentage points and the unemployment rate 5 climbing to 11.9 percent (versus 11.3 percent in 2012). The general government deficit for the euro area narrowed to 2.9 percent of GDP 6, against 3.6 percent of GDP in 2012, amid larger revenues (after taking steps to broaden the taxation base and lift some taxes) and slightly lower expenditures. The general government deficit improved from 2012 in ten out of the 17 euro area members and seven countries exceeded the 3.0 percent-of-gdp reference value. The lowest deficit-to-gdp ratios were displayed by Estonia and Austria (0.5 percent and 1.5 percent respectively), whereas Luxembourg and Germany reported budget surpluses (0.6 percent of GDP and 0.1 percent of GDP respectively). The euro area public debt ratio added 1.9 percentage points from the previous year to 90.9 percent of GDP. The debt ratio overstepped the 60 percent-of-gdp reference value in 12 countries and remained above 100 percent in Greece, Italy, Ireland and Portugal. In, Cyprus also joined the aforementioned four countries, as the country s public debt as a share of GDP went beyond the 100 percent mark from less than 80 percent in the prior year. The aggregate current account of the euro area 7 ended on a surplus of EUR billion, compared with EUR billion a year earlier, as a result of wider trade surplus (goods and services). Non-euro area EU Member States 8 reported economic growth of 1.5 percent in, against 0.4 percent in The performance was supported by domestic demand, general government consumption in particular, yet contained by poor external demand, especially from the euro area. In 8 out of the 11 non-euro area According to ILO (International Labour Office) methodology. Eurostat, Newsrelease Euroindicators 158/2014: Provision of deficit and debt data for second notification, 21 October BPM6 methodology (see the Methodological Notes). The countries referred to herein are the 11 non-euro area Member States at end-: Bulgaria, the Czech Republic, Croatia, Denmark, Latvia, Lithuania, Hungary, Poland, Romania, Sweden and the United Kingdom. 8 National Bank of Romania

10 Main developments in Romania s EU Member States, the GDP growth was in positive territory 9, with the best performers being Latvia, Romania and Lithuania, which posted rates of increase ranging from 3.3 percent to 4.2 percent. In, average annual inflation rate fell in the non-euro area countries to 1.9 percent, from 3 percent in 2012, due largely to decreases in commodity prices and indirect taxes. Inflation rates above 2 percent were recorded in Romania (3.2 percent), the United Kingdom (2.6 percent) and Croatia (2.3 percent). The fiscal position improved in 8 of the 11 non-euro area EU Member States, mostly on account of further fiscal consolidation efforts. Overall, the deficit-to-gdp ratio equalled 4.2 percent, against 5.9 percent a year earlier. The 3 percent of GDP reference value was exceeded in 3 of the 11 countries (the United Kingdom, Croatia and Poland), while other three countries were successful in correcting their excessive deficits (the Czech Republic, Denmark and Lithuania). Government debt accounted for 70.1 percent of GDP in the year under review, compared with 68.4 percent of GDP in 2012, and exceeded the 60 percent of GDP reference value in the United Kingdom, Croatia and Hungary, rising in the first two countries and declining in the last. The current account balance improved in the non-euro area EU Member States on the whole to reach -1.1 percent of GDP in against -1.6 percent of GDP in 2012, this trend being observed in all countries except the United Kingdom. Direct investment saw a net acquisition of assets in the 11 non-euro EU Member States during, compared to a net disposal in the previous year, driven by 4 countries (the United Kingdom, Sweden, Denmark and the Czech Republic), along with a net incurrence of liabilities smaller than that of 2012 (chiefly in the United Kingdom, Poland, Hungary and Denmark). Portfolio investment posted a net acquisition of assets that was lower than a year earlier (mainly owing to the United Kingdom and Denmark), together with a significant net incurrence of liabilities that was prompted by the same countries (after posting a net decline in 2012). Other investment (largely loans and deposits) reported a lower net disposal of assets (manifest in the United Kingdom, Sweden and Denmark), as well as a larger net decrease in liabilities (in the United Kingdom, Denmark and Romania). In the United States of America, gross domestic product grew 2.2 percent in, compared with 2.3 percent in The first-half slowdown, ascribed to further contraction in government consumption, subdued private non-residential investment and weak exports, was followed by a rebound in growth, reflecting continued improvements in the labour market and the positive wealth effect from rising stock and house prices. Average annual CPI inflation dropped to 1.5 percent in from 2.1 percent in the previous year, owing to lower energy prices and considerable spare capacity. Unemployment rate decreased to 7.4 percent in from 8.1 percent in The federal budget deficit narrowed by 3.3 percentage points to 5.7 percent of GDP, but the federal public debt increased to stand at 87.8 percent of GDP at the end of, compared with 86.5 percent at the end of The current account deficit stayed flat against 2012 at 0.1 percent of GDP. 9 An economic decline was reported by Croatia, the Czech Republic and Denmark. National Bank of Romania 9

11 Romania s Main developments in Japan s economy advanced by 1.5 percent in, similarly to the year before, as a result of implementing accommodative monetary and fiscal policies meant to root out persistent deflation and boost the economy. The average annual inflation rate, as measured by the consumer price index, went into positive territory in June, reaching 1.6 percent in December, the highest reading on record since Overall, the average annual inflation rate came in at 0.4 percent in from 0 percent in Unemployment rate moved down to 4.0 percent from 4.3 percent in the prior year. Emerging economies in Asia continued to grow at nearly the same pace as in the previous year (6.6 percent in against 6.7 percent a year earlier), amid stronger domestic demand, which offset the smaller contribution of net exports of goods and services. Inflationary pressures were contained by stable commodity prices on global markets, with the annual inflation rate reaching 4.7 percent, from 4.4 percent in the previous year. In China, real GDP growth remained unchanged at 7.7 percent in, amid the positive contribution of investment and consumption, whereas net exports of goods and services made a slightly negative contribution. Average annual consumer price inflation was unchanged from 2012 at 2.6 percent, the local currency continued to appreciate, and the country s foreign exchange reserves grew to 41 percent of GDP. For Latin America and the Caribbean region, year-on-year real GDP growth stood at 2.7 percent in, compared with 2.9 percent in the prior year, amid an adverse external environment and efforts made to reduce vulnerabilities by cutting public debt and strengthening foreign exchange reserves. The current account deficit for the region as a whole widened to 2.7 percent in from 1.8 percent in Urban unemployment rate moved down to 6.6 percent from 6.8 percent in the prior year. Annual inflation rate edged up to 7.1 percent in from 5.9 percent in 2012, amid the slowing economic growth. 10 National Bank of Romania

12 Romania s II. Romania s balance of payments and international investment position in A. Balance of payments In, Romania s balance-of-payments current account deficit amounted to EUR 1,168 million. Deficit financing was ensured by an increase in net liabilities in the form of direct and portfolio investment. Approximately three fourths of the current account deficit stemming from trade with the European Union (EU) were offset by the surplus from trade with extra-eu countries. The current account deficit arising from trade with the euro area accounted for two thirds of the current account deficit from trade with EU Member States. Table 1. Balance of payments in relation to the EU and the euro area EUR millions Total of which: EU Extra-EU EA Extra-EA Current account -1,168-4,522 3,353-2,988 1,820 Goods -5,443-7,584 2,141-4, Services 4,700 3, ,361 1,339 Primary income -3,112-2, , Secondary income 2,687 1, ,670 1,017 Capital account 3,038 2, ,075 Financial account 1,675-6,050 7,725-4,805 6,480 of which: Direct investment -2,924-2, , Assets Liabilities 2,897 3, , Portfolio investment -5,432-4,406-1,026-3,898-1,534 Assets Liabilities 5,656 4,506 1,150 3,911 1,745 Financial derivatives Other investment 7,921 2,755 5,166 2,936 4,985 Assets Liabilities -7,795-3,505-4,290-3,637-4,158 Note: Extra-EA - EU countries outside the euro area. 1. Current account In, Romania s balance of payments posted a EUR 1,168 million current account deficit, down 80.7 percent from The share of the current account deficit in GDP 10 stood at 0.8 percent compared with 4.5 percent in the previous year, 10 Calculated based on ESA 2010 methodology (source: NIS). National Bank of Romania 11

13 Romania s Main developments in with the 3.7 percentage point decline being attributable to the smaller deficit on trade in goods and to the larger service surplus, mainly in the private sector. Table 2. Contributions to the narrowing of the current account deficit Current account Goods Services Primary income share in GDP Secondary income Difference (p.p.) The developments in the current account and its components in absolute terms (Table 3) show the narrowing deficit on trade in goods, originating in a steeper increase in exports than in imports, concurrently with the consolidation of the surplus reported by the balance on trade in services over the last three years, due especially to manufacturing services on physical inputs owned by others and to the freight transport. The primary income deficit deepened further, reflecting a decrease in the net loss incurred by foreign direct investors and, to a smaller extent, a hike in interest payments on debt portfolio investment. Secondary income saw a slightly lower surplus than in 2012, amid the fall in workers remittances from abroad, in the context of the increase in the funds taken from the European Union. Table 3. Current account EUR millions Indices (%) 2012 /2012 Current account -6,052-1, Credit 56,961 65, Debit 63,013 66, Goods -8,931-5, Credit 39,901 43, Debit 48,832 49, Services 2,473 4, Credit 9,873 13, Debit 7,400 8, Primary income -2,304-3, Credit 2,372 2, Debit 4,676 5, Secondary income 2,710 2, Credit 4,815 5, Debit 2,105 2, National Bank of Romania

14 Main developments in Romania s Chart 1. Composition of the current account balance 5 EUR billions goods services primary income secondary income Balance on goods and services In, the balance on goods and services posted a deficit of EUR 743 million, accounting for 11.5 percent of the reading posted in the previous year, thanks to a significant contraction in the deficit on trade in goods and to the twofold increase in the surplus on trade in services Balance on trade in goods 11 In, the deficit reported by the balance of goods came in at EUR 5,443 million, down 39.1 percent from a year earlier, with exports expanding by 10 percent and imports adding merely 1 percent. The trade deficit-to-gdp ratio went down by 2.9 percentage points to 3.8 percent. 11 According to the BPM6 methodology, the balance on trade in goods does not include goods sent for processing for which there is no ownership transfer and thereby differs from the international trade in goods compiled and published by the National Institute of Statistics in line with the specific methodology elaborated by Eurostat (see Methodological Notes). National Bank of Romania 13

15 Romania s Main developments in Table 4. Balance on trade in goods 2012 Differences (+/-) EUR millions Exports (FOB) 39,901 43,879 3,978 of which: General merchandise 39,889 43,826 3,937 Net exports of goods under merchanting Imports (FOB) 48,832 49, Balance on trade in goods (FOB/FOB) -8,931-5,443 3,488 GDP 133, ,664 Current account balance -6,052-1,168 4,884 percent percentage points Share of exports in GDP Share of imports in GDP Share of balance on trade in goods in GDP Coverage of imports through exports (FOB/FOB) Economy openness (exports+imports)/ GDP Source: National Institute of Statistics, NBR calculations The highest monthly trade deficit in equalled EUR 688 million and was recorded in July and the lowest was of EUR 195 million in February. The trade balance by the eight groups of goods in the Combined Nomenclature ended on a deficit under chemical and plastic products (EUR 4,354 million), mineral products (EUR 2,831 million) and base metals (EUR 757 million), but posted surpluses under wood and paper products (EUR 945 million), machinery, apparatus, equipment and transport means (EUR 846 million), agrifoodstuffs (EUR 528 million), textiles, wearing apparel and footwear (EUR 227 million), and other goods (EUR 355 million). By geographical breakdown, intra-eu trade was the only source of the trade deficit, with extra-eu trade recording a EUR 2,141 million surplus. The coverage of imports through exports rose by 7.3 percentage points to 89 percent, whereas the openness of the Romanian economy decreased by 1.9 percentage points to 64.4 percent. Exports of goods amounted to EUR 43,879 million 12, up 10 percent from 2012, due to the advance in the external demand, especially from non-euro area countries. In terms of value, exports saw a EUR 3,978 million increase. 12 The share of exports of goods in GDP went up to 30.3 percent in from 29.8 percent in National Bank of Romania

16 Main developments in Romania s In, exports reported a monthly low in January (EUR 3,268 million), while a peak was seen in November (EUR 4,145 million). The monthly average of exports equalled EUR 3,657 million, up EUR 332 million from a year earlier. Imports of goods (FOB) reached EUR 49,322 million 13 in, up 1 percent (or EUR 490 million) from the previous year. In, imports saw a monthly low of EUR 3,544 million in January and a high of EUR 4,783 million in October. The monthly average of imports stood at EUR 4,110 million, EUR 41 million above the year-earlier figure. Chart 2. Monthly developments in exports and imports of goods 25 % versus the same year earlier month exports imports 15 Jan.12 Feb.12 Mar.12 Apr.12 May.12 Jun.12 Jul.12 Aug.12 Sep.12 Oct.12 Nov.12 Dec.12 Jan.13 Feb.13 Mar.13 Apr.13 May.13 Jun.13 Jul.13 Aug.13 Sep.13 Oct.13 Nov.13 Dec Structure and geographical breakdown of exports a) Structure of exports In, four groups of goods made larger contributions to Romania s exports compared with 2012: agrifoodstuffs (by 1.9 percentage points), machinery, apparatus, equipment and transport means (by 1.1 percentage points), wood and paper products (by 0.3 percentage points) and other goods (0.1 percentage points). The remaining four groups had smaller contributions to exports than in the previous year, as follows: base metals (by 2 percentage points), chemical and plastic products (by 0.9 percentage points), mineral products (by 0.3 percentage points), and textiles, wearing apparel and footwear (by 0.2 percentage points). 13 The share of imports of goods in GDP fell to 34.1 percent in from 36.5 percent in National Bank of Romania 15

17 Romania s Main developments in Table 5. Exports by group of goods in the Combined Nomenclature EUR millions Indices (%) Composition (%) 2012 / Goods 39,901 43, General merchandise 39,889 43, Agrifoodstuffs 4,016 5, Mineral products 2,610 2, Chemical and plastic products 4,869 4, Wood and paper products 1,878 2, Textiles, wearing apparel and footwear 2,310 2, Base metals 4,916 4, Machinery, apparatus, equipment and transport means 16,375 18, Other 2,915 3, Net exports of goods under merchanting * * ) Goods purchased by residents from non-residents and subsequently sold to other non-residents, without being moved on the country s territory. Source: National Institute of Statistics, NBR calculations b) Geographical breakdown of exports In, intra-eu exports totalled EUR 29,632 million, up 8.9 percent from The share of intra-eu exports in total exports was 67.5 percent, down 0.7 percentage points from a year earlier. The lower share is attributable especially to the slower growth of exports to Germany, Italy, France, Hungary and Bulgaria. Table 6. Exports of goods by group of countries EUR millions Indices (%) Composition (%) 2012 / Total 39,901 43, Intra-EU exports, of which: 27,206 29, Euro area, of which: 19,428 21, Germany 7,170 7, Italy 3,530 3, France 2,850 3, Extra-euro area, of which: 7,778 8, Hungary 2,216 2, Bulgaria 1,710 1, United Kingdom 1,297 1, Poland 1,067 1, Extra-EU exports 12,695 14, Turkey 2,459 2, Russian Federation 1,050 1, Ukraine USA Source: National Institute of Statistics, NBR calculations 16 National Bank of Romania

18 Main developments in Romania s Exports to the European Union went up for all groups of goods, except for base metals, which shrank by 3.9 percent. The following groups of goods posted larger contributions to intra-eu exports in : machinery, apparatus, equipment and transport means (0.9 percentage points), mineral products and wood and paper products (by 0.3 percentage points each), and agrifoodstuffs (0.2 percentage points). Table 7. Exports of goods to the European Union by group of goods in the Combined Nomenclature EUR millions Indices (%) Composition (%) 2012 / Goods 27,087 29, General merchandise 27,086 29, Agrifoodstuffs 2,787 3, Mineral products Chemical and plastic products 3,214 3, Wood and paper products 864 1, Textiles, wearing apparel and footwear 2,073 2, Base metals 2,892 2, Machinery, apparatus, equipment and transport means 12,236 13, Other 2,390 2, Net exports of goods under merchanting * 1 20 x * ) Goods purchased by residents from non-residents and subsequently sold to other non-residents, without being moved on the country s territory. Source: National Institute of Statistics, NBR calculations Extra-EU exports amounted to EUR 14,247 million, up 12.2 percent from 2012, accounting for 32.5 percent of total exports 14. The first ten export destinations 15 in were: Germany (17.8 percent of total exports), Italy (8.6 percent), France (7.0 percent), Turkey (5.6 percent), Hungary (5.1 percent), Bulgaria (3.8 percent), the United Kingdom (3.8 percent), the Russian Federation (3.1 percent), the Netherlands (2.8 percent) and Poland (2.6 percent) Up 0.7 percentage points from Accounting for 60.4 percent of total exports in. National Bank of Romania 17

19 Romania s Main developments in Structure and geographical breakdown of imports (FOB) a) Structure of imports Imports of goods were upheld in a proportion of more than 75 percent by four groups of goods: machinery, apparatus, equipment and transport means, chemical and plastic products, mineral products and base metals. The shares of the following two groups of goods in total imports declined compared with 2012: mineral products and base metals, by 2.6 percentage points and 0.2 percentage points respectively. Table 8. Imports of goods (FOB) by group of goods in the Combined Nomenclature EUR millions Indices (%) Composition (%) 2012 / Total 48,832 49, Agrifoodstuffs 4,527 4, Mineral products 6,741 5, Chemical and plastic products 9,005 9, Wood and paper products 1,193 1, Textiles, wearing apparel and footwear 2,511 2, Base metals 5,308 5, Machinery, apparatus, equipment and transport means 16,757 17, Other 2,790 2, Source: National Institute of Statistics, NBR calculations b) Geographical breakdown of imports Intra-EU imports amounted to EUR 37,216 million in, up 4 percent year on year. The share of intra-eu imports in total imports rose by 2.2 percentage points versus 2012 to reach 75.5 percent, with Germany, France, Poland and the Czech Republic making the largest contributions thereto. 18 National Bank of Romania

20 Main developments in Romania s Table 9. Imports of goods (FOB) by group of countries EUR millions Indices (%) Composition (%) 2012 / Total 48,832 49, Intra-EU imports 35,786 37, of which: 1.1. Euro area 24,471 25, of which: Germany 8,470 9, Italy 4,416 4, France 2,740 2, Extra-euro area 11,315 11, of which: Hungary 4,618 4, Poland 2,261 2, Bulgaria 1,458 1, Czech Republic 1,245 1, United Kingdom 1,060 1, Extra-EU imports 13,046 12, of which: Russian Federation 2,224 2, Kazakhstan 2,085 1, China 1,959 1, Turkey 1,704 1, Ukraine USA Source: National Institute of Statistics, NBR calculations Imports from the European Union posted increases in the shares of four groups of goods, as set out in Table 10: Table 10. Imports of goods (FOB) from the European Union by group of goods in the Combined Nomenclature EUR millions Indices (%) Composition (%) 2012 / Total 35,786 37, Agrifoodstuffs 3,690 3, Mineral products 1,606 1, Chemical and plastic products 7,357 7, Wood and paper products Textiles, wearing apparel and footwear 1,929 2, Base metals 4,028 4, Machinery, apparatus, equipment and transport means 13,893 14, Other 2,322 2, Source: National Institute of Statistics, NBR calculations National Bank of Romania 19

21 Romania s Main developments in Extra-EU imports equalled EUR 12,106 million (down 7.2 percent versus 2012), accounting for 24.5 percent of total imports 16. In, Romania s imports came mainly from the following ten countries: Germany (18.3 percent of total imports), Italy (9.1 percent), Hungary (8.6 percent), France (5.9 percent), Poland (4.8 percent), the Russian Federation (4.4 percent), Austria (4.1 percent), the Netherlands (3.8 percent), China (3.7 percent) and Turkey (3.5 percent). Imports from these countries accounted for 66.2 percent of total imports Energy trade balance 17 In, the energy trade balance ended on a deficit of EUR 2,559 million 18, down by a third year on year, while the coverage of imports of energy resources through exports thereof expanded by 10.6 percentage points to 50.1 percent. Crude oil, reporting net imports worth EUR 2,920 million, made further the largest contribution to the energy trade deficit. Energy exports totalled EUR 2,573 million 19, up 3 percent (EUR 74 million) from Energy imports amounted to EUR 5,131 million 20, down 18.9 percent (EUR 1,196 million) versus Tabel 11. Energy exports and imports (FOB) Exports EUR millions Imports Net imports (-)/ Net exports (+) Total 2,499 2,573 6,327 5,131-3,828-2,559 Natural gas Electricity Mineral fuels Crude oil ,053 2,951-3,023-2,920 Petroleum products 1,947 2,004 1,478 1, Source: National Institute of Statistics, NBR calculations Balance on trade in services The balance on trade in services posted a EUR 4,700 million surplus in, compared with EUR 2,473 million in 2012, on account of the increase in receipts from the processing of goods owned by others, transport, travel, telecommunications, computer, and information services, other business services. All components of the balance on trade in services except for travel witnessed a favourable evolution Down 2.2 percentage points from Goods sent for processing excluded, according to the BPM6 methodology. Increasing as a share of the deficit on trade in goods to 47 percent in from 42.9 percent in Decreasing as a share of total exports of goods to 5.9 percent in from 6.3 percent in Decreasing as a share of total imports of goods to 10.4 percent in from 13 percent in National Bank of Romania

22 Main developments in Romania s compared with 2012, with processing of goods, transport and other services recording higher surpluses. Table 12. Balance on trade in services EUR millions Indices (%) Composition (%) 2012 / Credit 9,873 13, Processing of goods 1,483 2, Transport 2,513 3, Travel 1,142 1, Other 4,735 6, Debit 7,400 8, Processing of goods Tansport 1,328 1, Travel 1,429 1, Other 4,516 5, Balance 2,473 4, Processing of goods 1,356 2, Transport 1,185 2, Travel Other Receipts from services totalled EUR 13,427 million, up 36 percent from 2012, with almost half of them coming from various services (telecommunications, computer, and information services, other business services) and approximately one fourth from transport (especially from road freight transport). More than three fourths of the receipts from services came from the following ten countries: Germany, Italy, France, the United Kingdom, Austria, the United States of America, the Netherlands, Switzerland, Belgium and Spain. Services-related payments stood at EUR 8,727 million, up 17.9 percent from 2012, with various services (financial, construction, legal, consulting, architectural, insurance, licence fees and royalties, audio-visual services) holding roughly 65 percent. More than 60 percent of services-related payments were made to the following ten countries: Germany, Austria, Italy, France, the United Kigdom, the Netherlands, the United States of America, Switzerland, Hungary and Spain Balance on primary income The balance on primary income ended the year on a EUR 3,112 million deficit, 35.1 percent wider versus 2012, in line with the evolution of direct investment income 21 (higher dividend payments and lower net loss) and portfolio investment (mainly payments on account of interest payable on government bonds). 21 Statistical survey on foreign direct investment in Romania in (the National Bank of Romania and the National Institute of Statistics). National Bank of Romania 21

23 Romania s Main developments in Table 13. Balance on primary income EUR millions Indices (%) Composition (%) 2012 / Credit 2,372 2, Compensation of employees Investment income Other primary income 992 1, Debit 4,676 5, Compensation of employees Investment income 4,315 5, Other primary income Balance -2,304-3, Compensation of employees Investment income -3,506-4, Other primary income 722 1, Concurrently, the decline in interest payments on loans and the consolidation of other primary income (mainly subsidies from the European Union), together with labour income posting the same levels, had a favourable influence on the balance on primary income by containing its deficit Balance on secondary income The balance on secondary income ended the year on a EUR 2,687 million surplus, 0.8 percent below the previous year s reading, mainly reflecting the reduction in net private transfers (lower receipts and larger payments). The balance on secondary income of the general government ended the year on a EUR 35 million deficit, accounting for 8 percent of the year-earlier deficit, given that inflows of EU funds almost doubled and offset the detrimental impact of higher contributions to the European Union budget. The balance on private secondary income posted a surplus of EUR 2,722 million, down 13.6 percent from the previous year, driven by miscellaneous current transfers (donations, inheritances, sponsorships, workers remittances from abroad). In particular, workers remittances from abroad stood 8.3 percent below the 2012 level, owing to the fragile economic recovery in the main destination countries for Romanian workers (Spain, France and the UK). Disbursements from the EU budget to Romania in were worth EUR 5,557 million, of which current transfers received by the general government totalled EUR 1,411 million 22, with the European Agricultural Fund for Rural Development (EAFRD) and the European Social Fund (ESF) holding approximately equal shares. Payments to the European Union amounted to EUR 1,535 million, representing almost entirely Romania s contribution to the EU budget. 22 Source: Ministry of Public Finance. 22 National Bank of Romania

24 Main developments in Romania s Table 14. Secondary income balance EUR millions Indices (%) Composition (%) 2012 / Credit 4,815 5, General government 835 1, Other sectors 3,980 3, Debit 2,105 2, General government 1,274 1, Other sectors 831 1, Balance 2,710 2, General government Other sectors 3,149 2, Capital account The capital account saw net inflows of EUR 3,038 million, up over 60 percent from a year earlier, prompted by the doubling of the capital transfers surplus, given the more than 75 percent rise in funds from the European Union, mainly from the Regional Development Fund, the Cohesion Fund, and the European Agricultural Fund for Rural Development. Table 15. Capital account EUR millions Indices (%) Composition (%) 2012 / Credit 2,238 3, Capital transfers 1,787 3, General government 1,685 3, Other sectors Acquisitions/disposals of non-produced non-financial assets Debit Capital transfers General government Other sectors Acquisitions/disposals of non-produced non-financial assets Balance 1,881 3, Capital transfers 1,596 2, General government 1,559 3, Other sectors x Acquisitions/disposals of non-produced non-financial assets National Bank of Romania 23

25 Romania s Main developments in 3. Financial account In, the financial account witnessed net outflows worth EUR 1,675 million, compared with net inflows of EUR 3,106 million in the previous year, particularly due to other investment, which reflected primarily the scheduled repayments under the Stand-By Arrangement concluded with the IMF in 2009 and reductions in non-residents deposits with resident deposit-taking corporations, adding to residents repayments of trade credit. These developments were also ascribable to the increase in the NBR s reserve assets. Outflows were partly offset by inflows of direct investment and portfolio investment during, the latter consisting in the bond issues launched by the Ministry of Public Finance on international markets. Table 16. Financial account EUR millions 2012 Financial account -3,106 1,675 Net acquisition of assets * -1,508 2,036 Net incurrence of liabilities * 1, Direct investment -2,379-2,924 Net acquisition of assets * Net incurrence of liabilities * 2,196 2,897 Portfolio investment -3,546-5,431 Net acquisition of assets * Net incurrence of liabilities * 4,014 5,656 Financial derivatives Net acquisition of assets * Net incurrence of liabilities * Other investment 4,094 7,922 Net acquisition of assets * Net incurrence of liabilities * -4,135-7,795 Reserve assets -1,452 2,143 Net acquisition of assets * -1,452 2,143 Net incurrence of liabilities * 0 0 * ) + increase, - decrease 3.1. Direct investment In, direct investment recorded net inflows in amount of EUR 2,924 million, up 22.9 percent from 2012 (EUR 2,379 million), amid the increase in equity (EUR 2,768 million versus EUR 2,676 million in 2012) and the reduction in losses incurred by direct investment enterprises in the real economy (EUR 344 million against EUR 1,266 million) both reflected in a net incurrence of liabilities. Behind the larger net inflows also stood the higher repayments by direct investment enterprises from abroad of loans taken from resident investors, from EUR 96 million to EUR 156 million (net disposal of assets). Net inflows were partly offset by net outflows stemming primarily from resident companies equity in direct investment enterprises abroad (EUR 127 million). 24 National Bank of Romania

26 Main developments in Romania s Investment by non-residents in Romania 23 totalled EUR 2,712 million, of which EUR 2,427 million were equity (consolidated with the net loss) and EUR 285 million intercompany lending. Table 17. Direct investment Net Net acquisition incurrence of assets * of liabilities * EUR millions 2012 Net Net Net acquisition incurrence of assets * of liabilities * Total ,196-2, ,897-2,924 Equity ,431-2,302 Equity, except for reinvested earnings Deposit-taking corporations, except the central bank Net -64 2,676-2, ,768-2, Other sectors -64 2,400-2, ,561-2,434 Reinvested earnings -23-1,881 1, Deposit-taking corporations, except the central bank Other sectors -27-1,266 1, Debt instruments -96 1,401-1, Deposit-taking corporations, except the central bank Other sectors -96 1,401-1, * ) + increase, - decrease 3.2. Portfolio investment Net inflows of portfolio investment amounted to EUR 5,431 million in, up from EUR 3,546 million a year earlier. This was primarily attributable to the Ministry of Public Finance tapping the international markets via a bond issue worth USD 1.5 billion on the US market in February and a Eurobond issue in amount of EUR 2 billion carried out in September, both of which led to a higher net incurrence of liabilities (EUR 5,198 million, compared with EUR 4,422 million in 2012). 23 According to the BPM6 methodological framework, the asset and liability presentation has replaced the directional principle in the presentation of direct investment data. For details on the presentation of data according to the directional principle, see Foreign Direct Investment in Romania on the NBR website. National Bank of Romania 25

27 Romania s Main developments in Table 18. Portfolio investment Net Net acquisition incurrence of assets * of liabilities * 2012 Net Net acquisition of assets * Net incurrence of liabilities * EUR millions Total 468 4,014-3, ,656-5,431 Equity and investment fund shares Deposit-taking corporations, except the central bank Net Other sectors Debt securities 280 3,700-3, ,875-4,603 Short term Deposit-taking corporations, except the central bank General government Other sectors Long term 252 4,443-4, ,273-4,970 Deposit-taking corporations, except the central bank General government ,422-4, ,198-5,198 Other sectors * ) + increase, - decrease 3.3. Other investment In, other investment recorded net outflows worth EUR 7,922 million, almost double the year-earlier figure, mainly reflecting the central bank s repayments scheduled under the Stand-By Arrangement concluded with the IMF in 2009 (EUR 3,665 million versus EUR 1,445 million in 2012) and the contraction in non-residents deposits with resident deposit-taking corporations (by EUR 2,577 million against EUR 1,997 million in the previous year), to which added resident companies tendency to speed up repayments of trade credit from non-residents (EUR 694 million compared with EUR 331 million). As a result, liabilities shrank by EUR 7,795 million, after contracting by EUR 4,135 million in National Bank of Romania

28 Main developments in Romania s Table 19. Other investment Net Net acquisition incurrence of assets * of liabilities * 2012 Net Net Net acquisition incurrence of assets * of liabilities * EUR millions Total -41-4,135 4, ,795 7,922 Currency and deposits Net 328-2,037 2, ,625 2,788 Central bank Deposit-taking corporations, except the central bank 222-1,997 2, ,577 2,575 General government Other sectors Loans 76-1,982 2, ,490 4,338 Central bank 0-1,445 1, ,665 3,665 Deposit-taking corporations, except the central bank General government Other sectors Trade credit and advances Deposit-taking corporations, except the central bank General government Other sectors Other accounts receivable/payable Deposit-taking corporations, except the central bank General government Other sectors * ) + increase, - decrease The current account deficit in accounted for less than 20 percent of the 2012 figure, whereas the capital account surplus stood more than 60 percent higher. The combined current and capital account ended the year on a EUR 1,870 million surplus (2012: EUR 4,171 million deficit), which enabled the release of the necessary funds in the financial account to ensure financing for external loans, to cover non-residents withdrawals and to consolidate the NBR s foreign exchange reserves. National Bank of Romania 27

29 Romania s Main developments in B. Romania s international investment position 1. Overview In, the international investment position has been compiled in line with the new methodological standards specified in the IMF s and International Manual, 6th edition. The international investment position saw its debit balance diminishing to EUR 89 billion at end-, down 1.8 percent from a year earlier. The balance on the 2012 investment position (EUR -90,628 million) was thus recalculated based on the new methodology by recognising the amount of EUR 1,148 million representing allocations of Special Drawing Rights from the IMF under the other investment item of foreign liabilities. The net position has witnessed a steady deterioration over the past years, mainly due to rising financing requirements that led to an incurrence of liabilities, while the level of foreign assets remained unchanged. However, the net position improved somewhat in, primarily on account of a reduction in foreign liabilities incurred during the previous years. Chart 3. International investment position 150 EUR billions assets liabilities net position During, foreign funding came largely in the form of portfolio investment (long-term debt securities) and direct investment (equity, intercompany lending). Non-residents loans and deposits made a negative contribution to foreign funding, given external debt repayments and the maturing deposits, only a small share of which was renewed, the same as in the previous year. 28 National Bank of Romania

30 Main developments in Romania s Table 20. Foreign assets and liabilities by instrument at end- EUR millions Assets Liabilities Net Direct investment 1,699 61,039-59,341 Portfolio investment 2,348 16,768-14,420 Financial derivatives Other investment 12,731 63,360-50,629 Reserve assets 35,434 35,434 Total 52, ,169-88,955 Chart 4. Foreign assets and liabilities by instrument 100 percent financial derivatives portfolio investment reserve assets direct investment other investment 0 Assets Liabilities The currency composition of foreign assets is dominated by the euro and the US dollar, with a cumulated share of 85.7 percent. The foreign liabilities of the investment position are mostly denominated in euro and lei, which jointly account for 87.2 percent of the total. Foreign liabilities expressed in US dollars and in Special Drawing Rights account for 10 percent of the total. Table 21. Currency composition of foreign assets and liabilities 31 December Foreign assets Foreign liabilities EUR millions % EUR millions % Total 52, , EUR 32, , USD 12, , GBP 1, JPY 1, RON 2, , CHF , RUN 1, XDR , Other National Bank of Romania 29

31 Romania s Main developments in Chart 5. Currency composition of foreign assets and liabilities EUR billions EUR USD RON XDR GBP JPY CHF RUN 0 Assets Liabilities other At end-, gross external debt totalled EUR 98.1 billion, down 2.8 percent from EUR billion at end-2012, amid repayments continuing in the period under review. Loans from parent undertakings amounted to EUR 20.3 billion (versus EUR 18.8 billion at end-2012), reflecting the preference for financing in the form of intercompany lending. Foreign investment in the form of equity grew by EUR 1.4 billion, totalling EUR 40.7 billion at end-, which is indicative of non-resident partners ongoing propensity for long-term investment in the shares and fund units of Romanian companies. The monetary authority s foreign assets remained unchanged from a year earlier, as the net positive financial flows related to reserve assets were dampened by revaluations resulting from changes in securities prices and exchange rates of the major currencies. The central bank s net position stood at EUR 29.6 billion at end- against EUR 25.6 billion in Net capital inflows worth EUR 2.1 billion under reserve assets were offset by revaluations from changes in prices (gold price and securities transactions, EUR -1.6 billion) and in the exchange rate (EUR -0.5 billion), which made Romania s international reserve stick to the end-2012 reading. The foreign assets of the banking sector equalled EUR 2.2 billion, up 17.4 percent from 31 December Foreign exchange assets of the National Bank of Romania and the banking sector amounted to EUR 34.7 billion, up from the end-2012 level of EUR 33.1 billion. 30 National Bank of Romania

32 Main developments in Romania s Table 22. Foreign reserve assets EUR millions Romania s international reserve 35,413 35,435 Gold 4,207 2,910 Foreign exchange 31,206 32, Credit institutions 1,892 2,222 Foreign exchange 1,892 2, Foreign reserve assets 37,305 37,657 of which: 3.1. Foreign exchange 33,099 34,747 The net debtor position of the banking sector shrank to EUR 23.9 billion, on account of the decline in foreign liabilities, driven mainly by the lower share of deposits as a means of funding over a period longer than one year. Table 23. International investment position EUR millions % EUR millions % Total -90, , General government -22, , Central bank 25, , Deposit-taking corporations, except the central bank -27, , Other sectors -66, , The net debtor position of the general government widened further by 18.9 percent as against end-2012 (to EUR 27.3 billion), given the higher external debt of this sector, which continued to finance the budget deficit via issues of government securities on the external and domestic market. The real sector witnessed a steady deterioration, its net debtor position widening by 2 percent (to EUR 67.4 billion) versus end-2012, given that non-resident investors continued to increase their equity in local companies and to grant loans to subsidiaries as the main means of funding. Financing via loans from entities other than parent undertakings was in the form of short-term funds. 2. International investment position 2.1. Foreign assets At end-, foreign assets stood at EUR 52,214 million, slightly up, i.e. 0.6 percent, year on year. The breakdown of foreign assets by main component of the investment position remained almost unchanged from end-2012, with reserve assets further prevailing (67.9 percent), ahead of other investment (24.4 percent), down slightly from National Bank of Romania 31

33 Romania s Main developments in a year earlier, portfolio investment (4.5 percent) and direct investment abroad (3.3 percent). At end-, the balance on residents direct investment came in at EUR 1,699 million, close to the 2012 level, following a slight increase in equity concurrently with a small reduction in intercompany lending to foreign companies. Table 24. Foreign assets by instrument EUR millions % EUR millions % Total 51, , Direct investment 1, , equity debt instruments 1, , Portfolio investment 2, , equity and investment fund shares or units long-term debt securities 1, , short-term debt securities Financial derivatives Other investment 12, , other equity loans 3, , trade credit and advances 3, , currency and deposits 4, , other assets Reserve assets 35, , The balance on portfolio investment of resident investors (EUR 2,348 million) surged by approximately EUR 300 million, 14.3 percent higher than at end The breakdown of portfolio investment by instrument shows Romanian investors bias towards bonds or other medium- and long-term securities, as well as towards shares of foreign companies, whereas investment in short-term securities was no longer attractive. During the period under review, the balance on other investment remained unchanged from a year earlier; the breakdown by component shows that loans and deposits posted a contraction, while other equity along with trade credits rose slightly. At end-, Romania s international reserves came in at EUR 35,435 million, a level similar to that seen at end-2012, even after external debt service payments had been made. The breakdown of foreign assets by institutional sector shows that the central bank further held the largest share (67.9 percent), ahead of the real sector (22.9 percent), general government (4.9 percent) and the deposit-taking corporations, except the central bank (4.2 percent). 32 National Bank of Romania

34 Main developments in Romania s Table 25. Foreign assets by institutional sector EUR millions % EUR millions % Total 51, , Central bank 35, , General government 2, , Deposit-taking corporations, except the central bank 2, , Other sectors 11, , Foreign liabilities At end-, foreign liabilities amounted to EUR 141,169 million, down 0.9 percent from the end of the previous year. Table 26. Foreign liabilities by instrument EUR millions % EUR millions % Total 142, , Direct investment 58, , equity 39, , debt instruments 18, , Portfolio investment 12, , equity and investment fund shares or units 2, , long-term debt securities 8, , short-term debt securities 1, Financial derivatives Other investment 72, , other equity loans 47, , trade credit and advances 1, , currency and deposits 21, , other liabilities SDR allocations 1, , The breakdown of foreign liabilities by main financial instrument shows that other investment further held the largest share (44.9 percent), down 5.9 percentage points versus 2012, followed by direct investment (43.2 percent) and portfolio investment (11.9 percent). At end-, the balance on non-residents direct investment stood at EUR 61,039 million, up 5.1 percent against end The weight of non-residents equity in resident companies went up 1.2 percentage points, with similar developments being reported for intercompany lending. National Bank of Romania 33

35 Romania s Main developments in Direct investment in the form of intercompany lending targeted all economic sectors, predominantly non-financial corporations that accounted for EUR 19.9 billion out of a total EUR 20.3 billion. Foreign investors held mostly unlisted shares on the Romanian capital market, equalling EUR 36 billion in non-financial corporations, banks, insurance and financial intermediation companies. Non-resident investors shares listed on the domestic capital market amounted to EUR 4.7 billion, with the non-financial corporations and deposit-taking corporations, except the central bank, as the main issuers. Direct investment in the form of fund units totalled EUR 40.5 million at end-. The interest of foreign investors from countries with tradition in investing in key areas in Romania stayed unchanged in as well. In, the major foreign investors 24 posted a similar geographic breakdown, coming from wealthy countries such as the Netherlands, Austria, Germany, France and Italy. The balance on foreign investment by development region shows that the Bucharest-Ilfov region was in the lead, followed by Centre and South (Muntenia), West and South-East. The same as in previous years, North-East came in last in terms of foreign direct investment. By economic activity, foreign investment was channelled mostly to economic activities such as manufacturing, financial intermediation and insurance, trade, and electricity, gas and water companies. The two components of direct investment posted similar developments during the period under review, with equity and intercompany lending picking up 3.7 percent and 8.2 percent respectively. At end-, portfolio investment saw its share in total foreign liabilities moving ahead 3.4 percentage points. The Ministry of Public Finance launched several government security issues on the domestic capital market, partly purchased by non-resident investors. The bias on the domestic market was towards acquiring long-term EUR-denominated government securities. External funding was also raised via issues of bonds on the foreign capital markets, which again proved very attractive to non-residents. The balance on equity investment stood at EUR 2,385 million at end-. The Government of Romania first launched a prospectus for a bond issue worth USD 1,500 million with a percent coupon on the US market in February. In September, the MPF launched on the European capital market a second issue in amount of EUR 1,500 million with a coupon set at percent. Finally, October saw the reopening of the September issue, totalling EUR 500 million at a coupon rate of percent. The bond issues on the foreign capital market were launched at lower prices than in previous years and were well received by investors amid 24 Statistical survey on foreign direct investment in Romania in (National Bank of Romania and National Institute of Statistics). 34 National Bank of Romania

36 Main developments in Romania s the inclusion of Romania s sovereign bonds into JP Morgan s GBI-EM index and the Barclays Capital reference index as well as the improvement in macroeconomic fundamentals. Other investment amounted to EUR 63,360 million at end-, down 12.4 percent from a year earlier, amid capital outflows in the form of interest payments related to all categories of financial instruments, short- and long-term credits, as well as deposits. Under other investments, a new component titled SDR allocations is shown, which is specific to the new methodology presented in the IMF s Manual, sixth edition. The breakdown of foreign liabilities by institutional sector indicates that, at end-, the real sector still held the largest share, the same as in previous years, followed by general government (with a rising share, due to increasing borrowing requirements), deposit-taking corporations, except the central bank (with a smaller share, due to a drop in the volume of deposits) and the central bank (whose share narrowed on account of repayments in line with the schedule agreed for the external funding package). Table 27. Foreign liabilities by institutional sector EUR millions % EUR millions % Total 142, , Central bank 9, , General government 25, , Deposit-taking corporations, except the central bank 29, , Other sectors 77, , Chart 6. Foreign liabilities by institutional sector percent 4.1 central bank 21.2 general government deposit taking corporations, except the central bank other sectors National Bank of Romania 35

37 Romania s Main developments in External debt As of 2008, gross external debt entered an upward path that revealed borrowing requirements by maturity, with its volatile component, i.e. the short term, displaying an uneven path. Chart 7. Gross external debt 120 EUR billions short term long term gross external debt At end-, external debt 25 totalled EUR 98,069 million, down 2.8 percent from end-2012, due to the drop in the short-term component and the long-term component by 8.2 percent and 1.3 percent respectively. Table 28. Foreign exchange reserve and external debt by currency 31 December Foreign reserve assets External debt EUR millions % EUR millions % Total 35, , EUR 24, , USD 8, , GBP 1, JPY 1, XDR , RON , Other , The composition of the foreign exchange reserve by currency reveals that 92 percent were accounted for by the euro and the US dollar. External debt posted a mixed currency breakdown, with euro-denominated liabilities in the lead, followed by those in domestic currency, US dollars and SDR. 25 External debt balance is cash-based, net of accrued unmatured interest. 36 National Bank of Romania

38 Main developments in Romania s Chart 8. Reserve assets and external debt by currency percent EUR USD RON XDR GBP 20 0 Reserve assets External debt JPY other Long-term external debt ran at EUR 78,860 million at end-, down 1.3 percent against end-2012, diminished by a negative adjustment stemming from exchange rate changes (EUR -1,398.1 million) and debt-to-equity swaps (EUR million). This contraction was limited by security price movements (EUR million) and net inflows (EUR 4.7 million). Long-term external debt by creditor at end- shows that private creditors further held the largest share, while official creditors saw their share slightly decreasing, owing particularly to the repayments on the 2009 financing agreement. Out of private creditors, foreign credit institutions continued to be long-term lenders to the economy, ahead of foreign companies and other financial institutions, while portfolio investment increased its share due to the further borrowing requirements. Chart 9. Long-term external debt by creditor 100 percent private banks international institutions portfolio investment other bilateral relations National Bank of Romania 37

39 Romania s Main developments in Table 29. Medium- and long-term external debt by creditor EUR millions % EUR millions % Total 79, , International institutions, of which: 28, , IBRD 2, , EIB 4, , EBRD 1, , EU 5, , IMF 11, , SDS-EC OECF Bilateral relations, of which: Republic of Korea Germany Japan USA Portfolio investment, of which: 8, , CS First Boston Switzerland 1, , Deutsche Bank JP Morgan Erste Bank 1, , Deutsche Bank Londra/HSBC 1, , Barclays/Citigroup 1, , Barclays/BNP Paribas/Citigroup Citibank/HSBC/Soc Gen/Deutsche Bank , Private banks, of which: 32, , Austria 13, , Germany 1, , France 2, , Greece 3, , Italy Ireland Luxembourg 1, , Hungary The Netherlands 5, , United Kingdom 1, , Other 10, , Long-term external debt by maturity at end- highlights that the share of debt with more than 5 years maturity continued to rise from a year earlier, further holding the larger share, while debt with maturity between 1 and 5 years declined slightly, due chiefly to non-publicly guaranteed loans. This reveals that both general government and non-financial corporations focus on maturities that ensure avoiding peak debt repayments. 38 National Bank of Romania

40 Main developments in Romania s Table 30. Long-term external debt by maturity EUR millions % EUR millions % Total 79, , years 17, , Public debt 2, , Publicly guaranteed debt Non-publicly guaranteed debt 14, , more than 5 years 62, , Public debt 29, , Publicly guaranteed debt 1, , Non-publicly guaranteed debt 31, , Chart 10. Long-term external debt by maturity 70 EUR billions publicly guaranteed debt public debt non-publicly guaranteed debt years more than 5 years 1-5 years more than 5 years 2012 Long-term external debt by type of interest rate reveals that floating-rate loans were further in the lead, but are currently on an downward path, the most frequently used floating rates being 6M, 3M, and 1M EURIBOR. Fixed-rate loans tended to increase, their rates being of up to 10 percent, with two variation bands of up to and over 5 percent. A change is to be noted in the breakdown by interest rate, given the preference for long-term loan agreements with as predictable as possible debt service. National Bank of Romania 39

41 Romania s Main developments in Table 31. Long-term external debt by interest rate EUR millions % EUR millions % Total 79, , Floating rates 48, , of which: IBRD STANDARD RATE M USD LIBOR 1, , M USD LIBOR 2, , M USD LIBOR M EUR LIBOR 1, M EURIBOR 4, , M EURIBOR 10, , M EURIBOR 11, , M EURIBOR 1, , Fixed rates 31, , % 16, , % 14, , over 10.0% Long-term external debt incurred by the central bank and the credit institutions contracted, due to repayments and withdrawals on deposits by non-residents, while the general government and the real sector saw an increase in debt, in line with the developments in their financing requirements. Table 32. Long-term external debt by institutional sector 2012 EUR millions % EUR millions % Total 79, , General government 24, , Central bank 9, , Deposit-taking corporations, except the central bank 16, , Other sectors 28, , National Bank of Romania

42 Main developments in Romania s Chart 11. Long-term external debt by institutional sector 100 percent 80 central bank deposit taking corporations, except the central bank general government 20 other sectors As regards the breakdown by instrument, the decrease in long-term external debt was attributed to the declining share of non-residents loans and deposits in favour of direct investment and portfolio investment instruments. Table 33. Long-term external debt by instrument 2012 EUR millions % EUR millions % Total 79, , Direct investment instruments 10, , Loans 42, , Trade credit and advances Currency and deposits 16, , Debt securities 8, , SDR allocations 1, , Other liabilities Chart 12. Long-term external debt by instrument 100 percent SDR allocations trade credit and advances direct investment instruments debt securities currency and deposits loans National Bank of Romania 41

43 Romania s Main developments in Throughout, the balance on short-term external debt dropped markedly (by 8.2 percent) to EUR 19,209 million, making up 19.6 percent of total gross external debt. Institutional sectors held various weights in the short-term external debt, the real sector further making the largest contribution, ahead of deposit-taking corporations, except the central bank, and general government. Table 34. Short-term external debt by institutional sector 2012 EUR millions % EUR millions % Total 20, , Government sector 1, Central bank Deposit-taking corporations, except the central bank 5, , Other sectors 14, , The real sector resorted more to short-term loans in as well. Deposit-taking corporations, except the central bank, continued to sharply reduce short-term flows, the same as the general government, amid the possibility to change the maturity of loans. Chart 13. Short-term external debt by institutional sector 100 percent central bank general government deposit taking corporations, except the central bank other sectors National Bank of Romania

44 Main developments in Romania s Table 35. Short-term external debt by instrument 2012 EUR millions % EUR millions % Total 20, , Direct investment instruments 8, , Loans 4, , Trade credit and advances 1, , Currency and deposits 3, , Debt securities 1, Other liabilities Short-term external debt by financial instrument shows an increase only in currency and deposits, whereas the other components, despite their persistently large shares, posted a downward trend, preserving however the usual ranking, namely intercompany lending, loans, trade credit and advances. A downward-oriented shift occurred in the short-term debt securities issued by the general government that opted for longer maturity issues. Chart 14. Short-term external debt by instrument 100 percent other liabilities debt securities currency and deposits trade credit and advances loans direct investment instruments In, external debt service amounted to EUR 58,251 million, of which principal repayments equalled EUR 54,873 million and payments of interest and commissions totalled EUR 3,378 million. Looking at the breakdown by maturity, the share of short-term external debt service decreased to 57.8 percent in from 65.6 percent in 2012, concurrently with the widening share of long-term external debt service from 34.4 percent to 42.2 percent. Table 36. External debt service (EDS) 2012 EDS (EUR millions) 54, ,251.4 EDS/GDP (%) EDS/EXP * (%) * ) Exports of goods and services National Bank of Romania 43

45 Romania s Main developments in Throughout, the share of external debt service stood above 100 percent of exports and over 40 percent of GDP, in the context of faster economic growth and swifter export advance. At end-, net external debt 26 came in at EUR 50,960 million (35.2 percent of GDP), the net international investment position stood at EUR -88,955 million (-61.5 percent of GDP), whereas gross external debt totalled EUR 98,069 million, accounting for 67.8 percent of GDP. Direct investment as a share in GDP rose to 43.4 percent in 2012, subsequently dropping slightly to 42.2 percent in. The analysis of the main indebtedness indicators in shows that the share of long-term external debt in GDP declined to 54.5 percent, the ratio of external debt to exports of goods and services was percent, while the share of interest in total exports of goods and services decreased to 5.9 percent. At end-, Romania s international reserve (foreign currency and gold) covered 7.3 months of imports of goods and services. The ratio of the National Bank of Romania s foreign currency reserve to short-term external debt 27 reached percent at end-, compared with percent at end Calculated as the difference between foreign assets and foreign liabilities related to all debt instruments (loans, currency and deposits, bonds and money market instruments, trade credits). Including external debt with maturity of up to one year. 44 National Bank of Romania

46 Statistical Section

47

48 Tables, Quarterly, Romania s International, Romania s Gross International Reserve, External Debt Indicators,

49

50 BALANCE OF PAYMENTS, EUR millions Item 2012 Credit Debit Balance Credit Debit Balance 1. Current account 56,961 63,013-6,052 65,158 66,326-1,168 A. Goods and services 49,774 56,232-6,459 57,306 58, a. Goods 39,901 48,832-8,932 43,879 49,322-5,443 general merchandise on a BOP basis 39,888 48,832-8,944 43,826 49,322-5,496 net exports of goods under merchanting goods acquired under merchanting goods sold under merchanting b. Services 9,873 7,400 2,473 13,427 8,727 4,700 manufacturing services on goods 1, ,356 2, ,134 transport 2,513 1,328 1,185 3,880 1,386 2,494 travel 1,142 1, ,196 1, other services 4,735 4, ,076 5, B. Primary income 2,372 4,676-2,304 2,505 5,617-3,112 compensation of employees investment income 809 4,314-3, ,424-4,649 other primary income , ,052 C. Secondary income 4,815 2,105 2,711 5,347 2,660 2,687 general government 835 1, ,544 1, other sectors 3, ,149 3,803 1,081 2, Capital account 2, ,880 3, ,038 A. Capital transfers 1, ,596 3, ,906 general government 1, ,559 3, ,007 other sectors B. Acquisition/disposal of non-produced/ non-financial assets Net acquisition of assets * Net incurrence of liabilities * Net Net acquisition of assets * Net incurrence of liabilities * 3. Financial account -1,509 1,597-3,106 2, ,674 A. Direct investment ,195-2, ,897-2,924 equity ,430-2,302 equity, except reinvested earnings -65 2,676-2, ,768-2,641 reinvested earnings -24-1,881 1, debt instruments -96 1,401-1, B. Portfolio investment 468 4,013-3, ,656-5,432 equity and investment fund shares or units debt securities 279 3,700-3, ,875-4,603 C. Financial derivatives D. Other capital investment -42-4,135 4, ,795 7, equity, other than direct investment and portfolio investment currency and deposits 330-2,036 2, ,625 2, loans 77-1,984 2, ,490 4, insurance, pension and standardised guarantee schemes trade credit and advances other accounts receivable/payable SDRs E. NBR s reserve assets -1, ,452 2, , Errors and omissions (net) 0 0 1, * ) + increase, - decrease Note: Totals may not add up due to rounding. Net National Bank of Romania 49

51 QUARTERLY BALANCE OF PAYMENTS, EUR millions Item Q1 Q2 Credit Debit Balance Credit Debit Balance 1. Current account 15,098 15, ,378 16, A. Goods and services 13,163 13, ,179 14, a. Goods 10,256 11, ,811 12,038-1,227 general merchandise on a BOP basis 10,254 11, ,801 12,038-1,236 net exports of goods under merchanting goods acquired under merchanting goods sold under merchanting b. Services 2,907 1,874 1,033 3,368 2,225 1,143 manufacturing services on goods transport travel other services 1,316 1, ,553 1, B. Primary income 784 1, , compensation of employees investment income 121 1, ,189-1,007 other primary income C. Secondary income 1, , general government other sectors Capital account A. Capital transfers general government other sectors B. Acquisition/disposal of non-produced/ non-financial assets Net acquisition of assets * Net incurrence of liabilities * Net Net acquisition of assets * Net incurrence of liabilities * 3. Financial account 1, ,659 A. Direct investment , equity equity, except reinvested earnings reinvested earnings debt instruments B. Portfolio investment 289 3,374-3, equity and investment fund shares or units debt securities 275 3,327-3, C. Financial derivatives D. Other capital investment 446-2,876 3, ,757 1, equity, other than direct investment and portfolio investment currency and deposits 359-1,355 1, loans -76-1, ,338 1, insurance, pension and standardised guarantee schemes trade credit and advances other accounts receivable/payable SDRs E. NBR s reserve assets Errors and omissions (net) * ) + increase, - decrease Note: Totals may not add up due to rounding. Net 50 National Bank of Romania

52 QUARTERLY BALANCE OF PAYMENTS, EUR millions Q3 Q4 Credit Debit Balance Credit Debit Balance Item 16,408 17, ,275 18, Current account 14,667 15, ,298 15, A. Goods and services 11,214 12,949-1,735 11,599 13,087-1,488 a. Goods 11,199 12,949-1,750 11,571 13,087-1,516 general merchandise on a BOP basis net exports of goods under merchanting goods acquired under merchanting goods sold under merchanting 3,453 2,162 1,291 3,699 2,466 1,233 b. Services manufacturing services on goods 1, , transport travel 1,531 1, ,675 1, other services 435 1, ,998-1,565 B. Primary income compensation of employees 233 1, ,944-1,705 investment income other primary income 1, , ,064 C. Secondary income general government 1, other sectors 1, ,147 1, , Capital account 1, ,116 1, ,044 A. Capital transfers 1, ,132 1, ,066 general government other sectors B. Acquisition/disposal of non-produced/ non-financial assets Net acquisition of assets * Net incurrence of liabilities * Net Net acquisition of assets * Net incurrence of liabilities * Financial account ,372 A. Direct investment equity equity, except reinvested earnings reinvested earnings debt instruments -21 1,632-1, B. Portfolio investment equity and investment fund shares or units 35 1,639-1, debt securities C. Financial derivatives -24-1,785 1, ,376 1,335 D. Other capital investment equity, other than direct investment and portfolio investment currency and deposits ,148 1, loans insurance, pension and standardised guarantee schemes trade credit and advances other accounts receivable/payable SDRs 1, , E. NBR s reserve assets Errors and omissions (net) * ) + increase, - decrease Note: Totals may not add up due to rounding. Net National Bank of Romania 51

53 ROMANIA S INTERNATIONAL INVESTMENT POSITION, EUR millions, end of period Institutional sector I. Central bank 27,885 24,026 25,712 25,803 25,557 29,644 foreign assets, of which: 28,297 30,888 35,982 37,283 35,444 35,464 foreign exchange reserve 26,221 28,303 32,432 33,193 31,206 32,525 monetary gold 2,049 2,556 3,518 4,058 4,207 2,910 foreign liabilities, of which: 412 6,862 10,270 11,480 9,887 5,820 currency and deposits loans from the IMF 0 5,686 9,083 10,231 8,654 4,708 SDR allocations 83 1,073 1,139 1,168 1,148 1,102 II. General government -7,863-11,216-15,939-20,260-22,970-27,303 foreign assets, of which: 2,391 2,366 2,592 2,734 2,575 2,563 other investment, of which: 2,391 2,366 2,592 2,734 2,575 2,563 other equity trade credit and advances 1,654 1,623 1,761 1,781 1,715 1,625 foreign liabilities, of which: 10,254 13,582 18,531 22,994 25,545 29,866 portfolio investment 2,706 3,329 4,275 6,098 9,500 14,214 debt securities 2,706 3,329 4,275 6,098 9,500 14,214 other investment, of which: 7,548 10,253 14,256 16,896 16,045 15,652 currency and deposits loans 7,507 10,172 14,139 16,062 15,952 15,535 III. Deposit-taking corporations, excluding the central bank -30,916-26,020-27,912-28,749-27,094-23,876 foreign assets, of which: 1,648 3,156 2,722 1,975 2,303 2,208 direct investment equity debt instruments portfolio investment equity and investment fund shares or units debt securities other investment, of which: 1,347 2,664 2,056 1,536 1,848 1,588 currency and deposits 1,117 2,318 1,721 1,158 1,369 1,348 loans other foreign assets foreign liabilities, of which: 32,564 29,176 30,634 30,724 29,397 26,084 direct investment 6,386 6,476 6,571 6,501 7,137 6,658 equity 6,386 6,476 6,571 6,501 7,137 6,657 debt instruments portfolio investment equity and investment fund shares or units debt securities other investmenti, of which: 25,879 22,467 23,901 24,130 21,982 18,866 currency and deposits 25,516 22,256 23,854 24,098 21,321 18,724 other foreign liabilities National Bank of Romania

54 ROMANIA S INTERNATIONAL INVESTMENT POSITION, (continued) EUR millions, end of period Institutional sector IV. Other sectors -58,196-61,604-60,846-62,352-66,121-67,420 foreign assets, of which: 7,398 8,067 10,247 11,419 11,570 11,979 direct investment 1,586 1,528 1,800 1,939 1,641 1,657 equity debt instruments 1,283 1,408 1,528 1,602 1,337 1,263 portfolio investment ,025 1,206 1,640 1,770 equity and investment fund shares or units debt securities other investment, of which: 4,876 5,647 7,422 8,274 8,289 8,550 currency and deposits 1,349 1,313 1,747 2,173 2,446 2,614 loans 2,325 2,539 2,994 3,188 3,162 3,163 trade credit and advances 1,114 1,751 2,612 2,767 2,468 2,573 other foreign assets foreign liabilities, of which: 65,594 69,671 71,093 73,771 77,691 79,399 direct investment 40,841 42,624 45,012 47,637 50,925 54,382 equity 28,505 29,124 28,961 30,503 32,131 34,057 debt instruments 12,336 13,500 16,051 17,134 18,794 20,325 portfolio investment 1,412 1,357 1,377 1,330 2,334 1,995 equity and investment fund shares or units 1,398 1,332 1,336 1,289 2,334 1,991 debt securities other investment, of which: 23,341 25,690 24,704 24,804 24,431 23,022 loans 20,567 24,273 22,956 22,764 22,565 21,362 trade credit and advances 2,770 1,417 1,744 1,972 1,847 1,564 other foreign liabilities Net position -69,090-74,814-78,985-85,558-90,628-88,955 foreign assets 39,734 44,477 51,543 53,411 51,892 52,214 foreign liabilities 108, , , , , ,169 Note: Totals may not add up due to rounding. National Bank of Romania 53

55 ROMANIA S GROSS INTERNATIONAL RESERVE, EUR millions, end of period National Bank of Romania 28,270 30,859 35,951 37,252 35,413 35,435 gold 2,049 2,556 3,518 4,058 4,207 2,910 foreign exchange reserve 26,221 28,302 32,432 33,194 31,206 32,525 Commercial banks 1,344 2,716 2,298 1,639 1,892 2,222 foreign currency 1,344 2,716 2,298 1,639 1,892 2,222 Gross international reserve 29,614 33,574 38,249 38,891 37,305 37,657 of which: Gross foreign exchange reserve 27,565 31,018 34,731 34,833 33,098 34,747 EXTERNAL DEBT INDICATORS, EUR millions External debt (ED) 72,467 82,303 93,624 99, ,857 98,069 medium- and long-term (MLT) 51,875 66,714 74,075 77,131 79,936 78,860 short-term (ST) 20,592 15,589 19,549 22,795 20,921 19,209 GDP 142, , , , , ,664 Exports of goods and services (EXP) 38,281 32,562 40,570 48,797 49,775 57,306 Imports of goods and services (IMP) 56,969 40,234 48,054 56,115 56,233 58,049 External debt service (EDS) 45,575 49,038 43,775 46,233 54,268 58,251 principal repayment 42,338 46,252 40,745 42,631 50,339 54,873 interest payments (INT) 3,237 2,786 3,030 3,602 3,929 3,378 Romania s international reserve (IR) 28,270 30,859 35,951 37,252 35,413 35,435 percent ED/GDP MLT/GDP ED/EXP MLT/EXP EDS/EXP EDS/GDP EDS/IR INT/EXP ST/ED Multilateral/ED months IR/IMP National Bank of Romania

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