Perspectives 2015: Should we dance or should we weep?

by Victor Lupu

 

Europe is in soft turmoil following the Ukrainian crisis and Russia’s involvement in the regions in Eastern Ukraine. The western sanctions were mild, intended to warn Moscow rather than threaten it. Then the game started to become more and more risky both for the Russian Federation and for the EU and the US. The allegedly new war between the US and Saudi Arabia regarding the international oil price has turned out its real… facade – the intention to enhance the sanctions’ effects on Russia. From this point of view, 2015 will be the year of dependence on oil prices.

The Russian influence in Eastern Europe is obvious, leading to insecurity in the region. In this context Romania is expecting the Deveselu anti-missile base to become operational this year, which will lead to enhanced strategic security for Romanians.

The EU, in its turn, is witnessing political unrest. Greece is an obvious potential bombshell. Elections are expected soon and the results may surprise the EU. Germany has warned recently it may let Athens leave the eurozone. Although the European Commission vowed total support for a Europe without ‘deserters’ the situation is unstable. The UK’s stand is not offering much hope either, as PM David Cameron seems keen to call the referendum on EU membership sooner than 2017.

Suspicions between older and younger EU members are holding on. Rich countries are the ones more virulent against migrants coming from Eastern Europe, especially from Romania and Bulgaria and distrustful regarding reforms in the East.

Having all kinds of potential crises in sight, 2015 is however expected with great hopes in Romania, especially after the presidential elections held last year.

Let’s see what specialists expect from it:

  • In the region Romania should face the Black Sea issue – the sea seems to have been transformed into a Russian-Turkish lake (if we are to remember former president Traian Basescu’s saying that the Black Sea has become a Russian lake). It looks like both the Russians and the Turks enjoy sharing the sea.
  • Another challenge is coming from Hungary; PM Viktor Orban is heading to an indefinite direction, far from democracy and from the EU targets. Its skidding may affect Romania by influencing the Magyar minority.
  • Romania is facing the Schengen area accession – slim likelihood, as recently western officials denied Romania’s chances to reach the goal. A first step would be to improve the justice system and its image abroad and get a positive Cooperation and Verification Mechanism (CVM) report this year. Democracy is under EU’s magnifying glass as well.
  • Bucharest needs to swiftly improve relations with EU members such as Germany, France, the UK and other countries – the new president in office Klaus Iohannis has a huge opportunity in this regard.
  • Domestic economy is seen by analysts as able to recover: GDP growth could go above 2 percent, inflation will not exceed 2 percent for the entire year; the RON/EUR average exchange rate is forecast at 4.4 units; exports are expected to grow further, however the annual rate will go under the 10 percent threshold; salaries will grow by 5 percent on average; Romania could become a regional hub for outsourcing; the number of employees in domestic economy is expected to grow by 100,000; unemployment will remain high for youngsters;
  • Banking – nonperforming loans are expected to remain a problem; analysts say they expect several banks to exit the market; the number of banking employees is expected to further decrease; loans in RON will be more and more attractive; sources quoted by Ziarul Financiar say Banca Transilvania might take over the second place in the banks’ top to replace BDR-GSG.
  • The insurance market is expected to stagnate or to increase by 1-2 percent; several brokers might leave the market; insurance companies will operate increases of the share capital.
  • RASDAQ market is to be closed down by end October; Hidroelectrica offer might be the only new regulated listing on the stock market; the energy sector is to remain the ‘star’ on the bourse; the launching of the pilot-programme for state bonds will attract new retail investors on the capital market.
  • The auto market will continue to grow by at least 10 percent; car production is expected to decline by at least 5 percent to less than 360,000 units; 2015 is the first year for the ‘First Car’ programme launched by the government.
  • Romania should finalise the new system of royalties; files such the Rompetrol memorandum, Enel’s exit from the domestic market, Hidroelectrica’s exiting the insolvency statute – the greatest files this year; energy companies are expected to announce the natural gas reserves in the Black Sea; the energy strategy should be finalised.
  • The medicine market is expected to grow by 2-3 percent; private insurance might gain ground; the ‘health card’ should become operational as well as electronic recipes.
  • Tourism business is expected to grow by up to 20 percent, following the VAT cut; Cluj-Napoca city will be the European capital of the youth in 2015 and should attract more foreign tourists this year.
  • The constructions market will increase by 5-10 percent; no highway is to be finalised, the Bucharest belt is expected to remain in the same stage; number of finalised dwellings – about 45,000, of which 10,000 in Bucharest-Ilfov region; the ‘First House; programme will go on in 2015 as well.
  • The wheat price is expected to remain below RON 1,000 per ton; grain crops could exceed 19 million tons; arable fields will have prices under EUR 5,000 per hectare.
  • Romanian analysts expect the EUR depreciation vs. the USD, even reaching parity exchange rates; the fall of crude prices is about to end; the West-Russia conflict should soften; the Wall Street stock exchange is expected to continue the upward trend; the ECB is to start printing euros to acquire bonds in its effort to avoid deflation and recession.
2015auto marketbankingblack seabombshelldavid camerondomestic economyEUEuropeEuropean CommissionGreecehungaryperspectivespolitical unrestpotentialpresidential electionsRomaniaroyaltiesRussiasanctionsSchengenturmoilUKUkrainian crisiswestern
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