Inside Romania: monthly briefing
Inside Romania: Monthly
The calm before the storm?
August was a more relaxed and uneventful month in Romania. Still, the peak of the summer holiday season was visible in the country’s tourist hotspots and on the roads, where traffic was higher than usual due to many Romanians coming from abroad to spend their holidays at home.
However, the relaxed atmosphere could be just the calm before the storm as Romania prepares for an agitated autumn and an even more complicated winter. The fast rise in COVID-19 cases and energy prices are two of the most pressing problems in Romania today. Meanwhile, the leaders of the top two ruling parties in Romania – PNL and USR-PLUS – are also engaged in internal power battles and the coalition is not running very smoothly.
On the COVID-19 front, Romania’s vaccination campaign made very little progress in August. The country’s vaccination rate among adults is currently around 30% just as the European Commission announced that 70% of EU’s population has been fully vaccinated. Meanwhile, the rise in new COVID-19 cases has accelerated in recent weeks, reaching levels not seen since May. This comes just two weeks before the start of a new school year in Romania in which the authorities hope students will be able to attend more classes in school than last year.
On the political scene, all eyes are on the internal elections in the National Liberal Party (PNL), the biggest party of the center-right ruling coalition in Romania. PM Florin Citu seems to have a slight advantage over PNL’s current leader Ludovic Orban, who has been trying to gather support with a traditional and nationalistic discourse. Meanwhile, PM Citu had to manage an image crisis caused by 20-year-old drunk driving charges in the US. Still, a large number of PNL regional leaders have expressed support for Citu. The PNL congress takes place at the end of September.
USR-PLUS, the other major party of the ruling coalition, also has internal elections scheduled in early October. There are three candidates in the race, but the battle will be between USR leader Dan Barna and PLUS leader Dacian Ciolos. There are still many tensions between coalition parties, which are split over some bit topics such as the justice reform and a EUR 10 bln state-backed investment program for the development of regional infrastructure. The Government is also expected to adopt an important budget revision this month.
The new macro indicators released in August show a mixed picture. Romania posted 13% economic growth in the second quarter compared to the same period of 2020 and the estimates for the full-year growth are around 7%. However, the inflation rate also spiked close to 5% in July, pushed by higher energy prices. The central bank expects annual inflation of over 5% at the end of this year and could start hiking the monetary policy rate this autumn.
The business sector remains active in terms of M&A deals and financing rounds. The local companies’ first-half results show a rapid recovery after last year’s dip caused by the pandemic and related restrictions. The big banks, in particular, posted strong profit increases in the first half. Meanwhile, the biggest insurance company in Romania is struggling to solve its financial problems with the help of a foreign investor.
In real estate, August market the signing of the biggest office deal in Romania this year, after a relatively modest first half. Still, the top investors are accelerating their investment plans. The hotel market also shows signs of recovery, with two new hotel openings in August and more planned for next year.
Other important milestones announced in August were the record grain harvest and Dacia’s new Sandero model climbing to number one in terms of sales in Europe.
Fresh data released in August show that Romania’s resident population continued to decline in 2020. Meanwhile, over one million Romanians were officially registered in the UK.
August also brought the first large music festivals in Romania since the beginning of the pandemic – Summer Well and Electric Castle – as well as new editions of the Transilvania Film Festival and Sibiu International Theater Festival. The large events series will continue in September with the George Enescu Festival and Untold.