This report covers the main Romanian macroeconomic releases of December 2013 as well as financial and political trends in the country during this period. It also reviews corporate news for companies including Hungary’s MKB Bank and its Romanian subsidiary Nextebank as well as Romania’s largest bank BCR, part of Austria’s Erste Group.

Good news surfaced over the year-end period: exports continued to grow at robust rates in November and the EU funds absorption rate improved in October–November. Industry performed encouragingly driven by external demand. On the downside, credit continues to shrink and the bank loan quality to deteriorate, albeit at slower rates. The central bank’s radical step of concomitantly cutting the interest rates by 25bps to 3.75% and the required reserve ratios by 2%–3% for forex and local currency liabilities is (debatably) likely to stir lending.

An absence of long-term concepts and strategies on the part of the courts and the country’s politicians in several recent legal and legislative cases has led to a mimetic adherence to principles invoked by the EC or IMF that are not actually absorbed and included in broader strategies. This inhibits investor and consumer confidence and has a material impact on the potential growth rate.

Key Points:

• In corporate news, Hungary’s MKB Bank announced the sale of its investment (96.3% direct ownership) in its Romanian subsidiary Nextebank. Romania’s largest bank BCR—part of Austrian group Erste—is considering the issue up to EUR 2.4bn of bonds in 2014, given Erste Group’s potential exposure to regulations resulting in weaker financial support for foreign subsidiaries.

• Romania’s current EU funds absorption rate increased significantly by 18.55pps to 33.47% at the end of 2013, the Ministry of European Funds announced. The intermediary payments already cashed by final recipients of EU-funded projects increased by 15.02pps to 26.49% at the end of the year.

• Romania’s industrial production index increased by 7.4% year on year in January–October after strengthening by 10.6% year on year in October alone, the statistics office reported on December 10.

• In October the industrial expansion hit its steepest annual rate in more than two years. Exports continued to rise robustly in November by 7.7% year on year, contributing to the significant 9% year on year advance in January–November 2013.

• The 12-month rolling exports as of November 2013 [EUR 48.8bn] were 44.5% above the pre-crisis peak level reached in September 2008.