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The Romanian government today approved payments for agricultural subsidies for the year 2017, amounting to about 1.8 billion euros, representing direct payments in the vegetal sector, national aid to the livestock sector and coupled support scheme for sheep / goat species.

Direct payments in the vegetable sector are as follows:
> single area payment scheme, at a minimum of EUR 97.24 /ha;
> redistributive payment: 5 EUR /ha for 1-5 ha inclusive and 48,32 EUR /ha for 5-30 ha inclusive;
> payment for agricultural practices beneficial to the climate and the environment, also called greening payment - 57,17 EUR /ha;
> payment for young farmers - 24,31 EUR /ha.

The Romanian Government also approved the ceilings for transitional national aids in the livestock sector and set the amount for the 2017 payment year, as follows:
> EUR 24.08 million for the decoupled production scheme for the milk sector, the bovine species;
> EUR 101.2 million for the meat sector, the bovine species;
> EUR 50.78 million for ovine / caprine species.

The amount of such subsidies shall be calculated by reporting the amounts to the quantities of milk delivered and/or sold directly eligible, respectively at the number of bovine herds or eligible sheep / goat females.
At the same time, the Executive has approved the EUR 48.5 million ceiling for direct payment for the coupled support scheme for sheep / goat species to be granted for the year 2017. The amount for this scheme is calculated by reporting the ceiling to the eligible livestock.

Romania had the highest economic growth rate in the EU in the first quarter of the year, 5.6% against the corresponding period of 2016, the Eurostat announced. In contrast, the Eurozone reported a 1.7% growth rate, and the EU as a whole 2%.
According to the National Statistics Institute, in the first quarter of the year Romania had a 5.7% economic growth rate compared to the corresponding period of last year, and the Government expects a 5.2% rate for the entire year. The first quarter of 2017 was the 7th consecutive one to report growth.

The figure exceeds the level on which the Cabinet has based the state budget for this year, and which has been seen by many as optimistic. The growth announced by the national authorities has been confirmed by the European statistics bureau, the Eurostat, which says Romania had the highest growth rate in the EU, namely 5.6%.

The Fiscal Council however warns that the GDP growth has been fuelled primarily by consumption. PM Sorin Grindeanu says this performance is a confirmation of the economic measures taken by the Government, as well as the consequence of enhanced confidence from the business environment in the measures announced for the forthcoming period.According to the Cabinet, the growth rate in the first quarter has been heralded by other positive developments in the economy. For instance, exports have reached an all-time high of 5.7 billion euros in March, and in the first 4 months of the year over 100,000 new stable jobs were created. The industrial output also sees substantial increases, while unemployment is at its lowest since 1989.

Upon the presentation of the report on financial stability in 2017, the vice-governor of the national bank, Liviu Voinea, says that, in comparison with the previous report, financial stability has remained robust in Romania, and risks have diminished in intensity and number, but have nevertheless diversified. Also said that a recently emerged risk, which is low for the moment, is that of an increase in real estate prices.

Economic forecasts indicate that Romania will continue to have a growing economy, but below that of 2016, estimated by international financial organizations and various experts at 4.5 to 5.2%. The European Commission expects the growth in 2017 to reach 3.9% from its expectation of 5.2% in 2016, while the World Bank estimates a growth of 3.8% in 2017, the same figure issued by the International Monetary Fund. The European Bank for Reconstruction and Development expects a 3.7% growth, matching Moody's 3.7% estimation, after issuing a forecast of 4.8% for 2016. The National Forecast Commission estimated 4.8% growth for 2016, and 4.2% for 2017.
 
According to a Moody's report, private consumption remains Romania's main engine for growth, though to a lesser extent than in 2016, considering expectations of higher oil prices and inflation. Continuing an expanding tax policy in 2017, including scrapping a tax on special purpose buildings and an additional fuel excise, as well as a cut in the VAT, will result in a deterioration of Romania's fiscal position. The agency expects the fiscal deficit to exceed 3% of the GDP in 2017, since measures increasing it would counter solid economic growth. Moody's expects Romania's credit rating to be negatively impacted by the deterioration of its fiscal policy, along with its effect on its fiscal position.
 
In his turn, economic analyst Constantin Rudnitchi explains: “We also have a piece of good news from statistics, the fact that investments start taking up a bigger slice of this economic growth, therefore this is a good thing, as investment may balance out a bit better against consumption in terms of economic growth".

The construction sector had an important contribution to economic performance registered in 2016, where Romania had the highest growth in the EU in the second quarter 2016.
In the first half of 2016, compared to last year, the volume of construction works increased per total, as gross series, by 5.3%. By structure elements, there were rises in maintenance and current repairs works and in new construction works of 9.7% and by 6.1%, respectively.
By construction objects, there were rises in engineering works and in residential buildings of 8.7% and of 5.4%, respectively. The non‐residential buildings decreased by 0.6%.

The volume of construction works increased per total, as adjusted series by the number of working days and by seasonality, by 5.0%.
By structure elements, there were rises in maintenance and current repairs works and in new construction works of 14.1% and of 3.4%, respectively. The capital repair works decreased by 5.5%.
By construction objects, the volume of construction works increased in engineering works and in residential buildings by 12.5% and by 3.7%, respectively. The non‐residential buildings decreased by 1.5%.

The Romanian real estate market seems to have ended its decline caused by the global economic crisis.
At national level, prices for homes are on average 10% higher than last year, according to a dedicated portal on the web. In late November, the average asking price for apartments was 980 Euro per sqm, which is 52.4% lower than the market peak, in March 2008, when sellers generally asked for 2,058 Euro per sqm. The lowest pricing level was reached in December 2014, when median figures on the above mentioned portal were around 891 Euro per sqm, 10% lower than at present.

The market for older apartments and newly built evolved differently. In Bucharest, for instance, a brand new apartment cost 1,155 Euro per sqm in late October, 55% lower than the March 2008 peak. By comparison, an older apartment is now, on an average, 1,043 Euro per sqm, almost 53% less than on the peak market.
One factor that encouraged the residential real estate market was the 2009 government program called 'First Home',  which grants loans of up to EUR 70,000 with a down payments are only 5%, with below the market interest rates. The program was expanded, and the owners who used the First Home program could purchase a more spacious home with support from the National Loan Guarantee Fund for SMEs.

Romania right now is third in Central and Eastern Europe  after Poland and the Czech Republic in terms of real estate transactions, which in the first ten months of the year amounted to 600 million Euro, according to a study published by Jones Lang LaSalle Romania. In 2014, real estate transactions in this country amounted to 1.15 billion Euro, a record figure for the last few years. This figure was, among other things, a result of the store chain Auchan taking over the Real chain of stores, a transaction between 260-280 million Euro.

The European Commission and the EBRD have upgraded their economic growth forecast for Romania. According to estimates at this point, the European Commission has upgraded its economic growth forecast for Romania in 2015 to 3.5%, as opposed to the 2.8% it expected in May. The GDP is expected to grow by 4.1% in 2016, and by 3.6% in 2017, as a result of better consumption against tax cuts. Inflation is expected to stay at a negative 0.4% this year, and negative 0.3% next year, getting back to 2.3% in 2017. Government debt is expected to go down to 39.4% of the GDP this year, going up subsequently to 40.9% of the GDP in 2016, and to 42.8% of the GDP in 2017. The budget deficit will reach 1.2% of the GDP this year, with 2.8% next year, and 3.7% the following year, according to the European Commission estimates.

The European Commissioner for the Euro and Social Dialogue, Valdis Dombrovskis, said that "economic forecasts suggest that Romania’s economy will improve, which would not have been possible without decisive action in reforming public finance. He also added that continuing structural reform was extremely important, in addition to ensuring the sustainability of public finance and short and medium term economic growth through responsible budget policy".

According to a study conducted by Ernst&Young, Romanian business leaders are confident that their businesses will grow this year, just as the whole economy will. Over one third of business people expect their turnover to increase significantly, while half of them are optimistic about the country’s economic evolution.

The IMF has revised its economic growth forecast for Romania, from 2.7% to 3.4% this year and from 2.9% to 3.9% for 2016.

Romania and Cyprus had the most substantial economic growth in the EU in the first quarter of the year, as compared to the previous three months, according to preliminary estimates released on Wednesday by the European Statistics Office. In figures, thanks to a 1.6% growth rate, the two countries are the EU leaders, followed by Spain and Bulgaria with 0.9% each, Slovakia - 0.8%, and France and Hungary - 0.6% each.
At the opposite pole we find Lithuania, Estonia, Greece and Finland, which have reported decreases. The year-on-year rate Romania has reported, 4.2%, is also the largest in the EU.

However, the geopolitical context requires special attention. The European Bank for Reconstruction and Development says East Europe should strengthen its capacity to withstand shocks, as the countries in the region risk being affected by the political and economic problems in Russia, Ukraine and Greece. Central European countries enjoy an economic recovery supported by domestic demand. However, bad loans are still a problem, while Russia and Ukraine remain in recession, which might affect growth in other countries, says the
EBRD. In addition, it is impossible to estimate the impact of the Greek exit for its neighbouring countries, given that Greek banks are operating in countries like Bulgaria and Romania.
Beyond political promises, Bucharest needs to take concrete social and economic measures to support underprivileged people.

After an increase a Romania’s GDP last year by 2.9% in real terms compared to 2013, one of the highest economic growth rates in the EU, the economic forecasts for this year in Romania indicate a growth of 2-3%. The government, for example, provides in its state budget for an economic growth rate of 2.5%, a cautious target which will nevertheless force a growth rate of more than 3%, depending on external factors, Cristian Socol, an advisor to the prime minister told Agerpres agency. In his opinion, the budget is again focused on investment and the creation of new jobs. “Expenditure dedicated to investment is by 24% higher than in 2014. The 2015 budget also encourages the private sector by increasing co-funding for the absorption of European funds, state guarantees and state aid schemes, more support for farmers, concrete facilities for foreign investments with added value, the development of industrial and technological parks and incentives for technical education”, said Socol.

The 2015 state budget provides for a deficit level of 1.83%, as agreed upon with the International Monetary Fund and the European Commission, and an average annual inflation rate of 2.2%. The market research company Business Monitor International estimates that the Romanian economy will grow by more than 3% this year and in 2016, based on the transition from export-based growth to growth generated by domestic demand. The National Forecast Committee expects an economic growth of 2.5% for this year. The figure is closer to the estimates of the European Commission and the International Monetary Fund of 2.4% and 2.5%, respectively, but below the growth rate of 3.2% predicted by the World Bank in June 2014.

Economic analyst Constantin Rudniţchi speaks about what happens in the private sector: “In the private sector things still do not work as well as we would like them to, or as the macroeconomic parameters indicate. In other words, this economic growth that we have been talking about a lot recently, does not necessarily transfer into the private economy. We are in a paradoxical situation, as figures indicate, there is a lot more stability in the budgetary sector and sometimes even the salary increases come from this sector, rather than from the private economy. This is a proof that the real economy is not yet working properly, that those macroeconomic increases do not translate in real data, that many economic sectors probably still experience difficulties, businesses are affected, they either fail to grow or they grow very slowly, and entrepreneurs are very careful about the salaries they pay to their employees. Although the industry as a whole accounts for roughly 30% of Romania’s GDP, there are only some industrial sectors with good performances, or even specific companies in those sectors, particularly exporting companies and those companies which have substantial sales on the domestic market, namely companies in the oil sector, natural gas sector, the energy sector in general.”

We should also note that Standard & Poor’s rating agency expects Romania’s GDP to grow by an average 2.7% in 2015 – 2017, while Fitch estimates a 3% annual growth rate for 2015 – 2016, as a result of resumed investments, among other factors.

On January the 1st, 2014 Romania officially granted foreign citizens the right to directly purchase farmland.  Prior to this date, foreign citizens were allowed to buy farmland in Romania only after setting up a Romanian firm. Experts have warned that the purchase of farmland, by foreign citizens, will increase significantly and that the state should thoroughly control this type of transactions. In 14 years alone, 3 million hectares of farmland have been purchased in Romania, which means that a third of Romania’s fertile land is now owned by Italian, Danish, German, Norwegian, Dutch, Hungarian and Lebanese citizens.
Officially, companies running on foreign capital have already bought 1 million hectares of farmland, and have signed lease contracts for another 2 million hectares.According to Laurentiu Baciu, head of League of Romanian Farmers' Associations, foreigners cultivate land in Romania, taking advantage of the fertile land, the small price per hectare and the cheap labour force but sell the crops in the countries they come from. There, the wheat Romanian is processed in specialties or used for animal feed, then exported to Romania and sold to Romanian consumers for a prices bigger than the domestic ones.

Most foreign investors bought fertile farmland in the Calarasi, Ialomita and Banat regions. Italian investors have particularly invested a lot, purchasing some 250,000 hectares of land, most of which in Western Romania. High on demand are plots of land that are pooled together and highly productive. The hesitation of landowners and farmers in selling their small plots of land, inherited from their parents, makes farmland price report a constant upward trend. For instance, in Intorsura village in Dolj county, prices for arable plots of land have increased from 600 euros some years back to 1,500 euros in poor regions, or 2,000 or even 3,000 euros for  productive and abundant farmland.
Farmland in Moldova and northern Transylvania is cheap, but too scattered for an investor to be able to buy large tracts. Maybi for this reason, there are few agricultural operations near Salaj, while the biggest farmers there are foreign business people who bought large areas of land in the 1990s.

Starting April, farmland is to be sold under new regulations. Romanians must observe a new set of procedures in order to be allowed to sell their land. First they must notify the local town hall with respect to their intention to sell, while the sale cannot be completed any sooner than 30 days. The seller must specify a price, while the town hall will make the price public, informing co-owners, the family, landholders, neighbors and the entire village. They have priority rights to buy the land. Romania has some 14 million hectares of farmland at present, of which 10 million hectares in use.

For the whole of 2013, Romania’s GDP, meaning the total of goods and services in the overall economy, went up by 3.5% against 2012, according to the National Institute of Statistics.
Those are positive signals, which should also be sustained for this year and the next, as Prime Minister Victor Ponta put it. He claimed that this year Romania would save 2 billion Euros when taking out loans on financial markets. He also said that, starting on 1 July, there were plans to reduce social security contributions, but most likely the measure to be taken would be exempting reinvested profit from taxation:
“Things went well in 2013. It went well in terms of economic growth, deficit, European fund absorption, and of course, in 2014 we may continue to boost measures for social balancing, pensions, wages, and for the private industry. Rising exports and growing industrial output were very important. We are on the same growth trend. Of course we can afford to go ahead with such measures when things go well. We saw investments grow in 2013 as well, therefore exempting reinvested profit from taxation is a feasible objective.”

Professor Dan Armeanu from the University of Economic Studies of Bucharest says that unfortunately, the economic growth is not reflected in the pockets of the population:
“Right now things are good. We have a very good marcroeconomic stability, and here we can go into details: one of the highest economic growth rates in the EU, a small public debt, in the context of the European crisis, a low inflation rate, which is on account of the good agricultural year, an unemployment rate within reasonable limits, much lower than the EU average, and the lowest current account deficit of the last 20 years. In 2013, the good farming year saved the economic growth, and impacted inflation. Here we should add exports, because they developed a lot based on exports outside the Eurozone, and that would be very good for the future economic growth if it becomes permanent. The problem is that this economic growth, unfortunately, is not reflected in the pockets of the population.”

The European Commission anticipates a 2.3% growth rate in the Romanian economy for 2014.

In spite of the fact that international financial institutions, the Romanian government and economic analysts estimated at the start of the year that Romania will register an economic growth rate of 1.6% in 2013, they have recently revised upward the growth rate. For instance, the International Monetary Fund has improved the economic forecast for this year to 2% and to 2.5% for 2014, against the backdrop of bigger exports and a better agricultural output than in 2012.
The IMF estimates that Romania’s current account deficit will further decrease to 2 or 2,5% of the GDP this year, and the inflation rate will also go down by the end of the year, within the limits targeted by the National Bank of Romania.

The head of the IMF mission to Romania, Andrea Schaechter, has said that “as regards the fiscal policy, the Romanian government is determined to achieve a gradual fiscal consolidation.Once the budget revision announced, the government made public its decision to reach a deficit of 2.3% of the GDP on cash and 2.4% on the European System of Accounts (ESA) this year, as well as a structural deficit below 1% of the GDP until 2015”, says Andrea Schaechter. She has mentioned that the fiscal policy will be supported by institutional reforms, including measures to stimulate medium term planning, develop the administrative capacity, speed up the absorption of European funds, consolidate fiscal administration and governance and ensure a better control of arrears.
Nevertheless, according to the September report issued by Economist Intelligence Unit, Romania’s economy will go up by 2.5% in 2013, which “mirrors the situation in the Euro zone, with the growth rate expected to increase considerably in the 2014-2017 period, up to an annual average rate of 4%”.

The vice-president of the European Investment Bank, Mihai Tanasescu has said that in order to ensure economic growth, which is essential to absorb European funds, Romania should take some steps: “We stand a big chance, an unique chance that other countries don’t stand, namely the opportunity to attract more European funds, to be able to use cheap investment money, such as those coming from the European Investment Bank, to be able to use resources for big projects, so that the economic growth rate reaches Romania’s potential, of 3-4%. This thing is achievable, in 2-3 years’ time. This potential can be reached.”


According to the aforementioned report drawn up by Economist Intelligence Unit “a better absorption of European funds will contribute to the investment in infrastructure and subsequently might lead to an increase in Romania’s exporting potential on the long term. Romania has obtained structural funds worth 22 billion Euros from the EU budget, for the following budgetary term. Romania will also receive funds for agriculture, worth 17.5 billion Euros in the 2014-2020 period, under the Common Agricultural Policy, which is a significant increase from the 13.8 billion Euros in the 2007 – 2013 period.

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