Merry Xmas and A Happy New Year

Well, a Merry Xmas and a Happy New Year to all my readers. Thank you for taking the time and trouble to pass-by. This blog will now - failing major and surprising new developments in the global economy - be offline till the end of the first week in January, or till after the festival of Los Reyes Magos in Spain (for those of you who know what this is all about). Come to think of it, maybe this is just what our ever hopeful central bankers are in need of even as I write - some surprise presents from the three wise men - but I fear that this year if these worthy gentlemen do somehow show at the next G7 meet, the star in the east which draws them will not be the one described in the traditional texts, but in all likelihood the rising star of India.



Credit crunch, did someone use the expression credit crunch?

Romania Trade Deficit October 2007

Romania's trade deficit has steadily deepened during the first ten months of this year, and has already reached over 17.2 billion euro, an increase of over 6 billion euro when compared with the same period of 2006, according to data this week from the National Statistics Institute. The overall trade deficit for the whole of 2006 amounted to "just" some 14.8 billion euro.




Over the same period, the total value of exports grew by 13.2%, rising to 24.2 billion euro, while imports advanced 27.2% to 41.4 billion euro.
In October this year, exports exceeded 2.7 billion euro, a 17.2% increase as compared to the similar month last year. On the other side, imports reached in October the total value of 4.9 billion euro.

Labour Shortage in Romania?

Well according to Labor Minister Paul Pacuraru, quoted in the newspaper Ziarul Financiar, Romania needs at least another 300,000 workers to meet current needs and will need more than 1 million within a decade.

The labor shortage, Pacuraru said, is caused partly by a migrating workforce and partly by a declining population, and is most acute in construction, and the textile, automobile and food processing industries.

Maybe he has been reading this blog (and here, and here).

Actually, according to the UK Daily Telegraph finance minister, Varujan Vosganian, aims even higher, saying Romania lacks half a million workers."We need more engineers, mechanics and bricklayers," he is quoted as saying "We have a labour deficit of 500,000 employees."


And he wasn't talking about the elites - doctors and IT programmers gone to make their fortune elsewhere, though that would be damaging enough. Romania needs its skilled labourers to return - the people who are going to build up the infrastructure that the country so severely lacks. But when we look at the wage differentials, this idea of a mass return would seem to be a forelorn hope to me, in Latvia, in Poland, in Ukraine or in Romania.

So the simple issue is, what is now the normal capacity neutral growth rate for Romania at this point (remember this will get less as the population continues to decline)? That is, what is the annual growth rate which Romania is capable of without seeting off the sort of inflation we are seeing at the moment? Noone really knows, but it is obviously well below the rate Romania is currently growing at.

Second question: when and how will the adjustment come?

Romania Inflation November 2007

Well here it is, I wouldn't say it was exactly good news, but a drop in inflation to an annual 6.67% from an annual 6.84% isn't bad news at any rate, unless you thought inflation was going to suddenly go away it isn't.



On one level you might have thought that the rot had been stopped, but it's not that simple. The month on month rate is 0,93, which is down from last months 0,97. But if we look at the components, then food rose 1,17% month on month, while services rose 1,21 month on month. In October food was up 1.3% over September, while services where only up 0,98. So food seems to be slowing, but price increases in services are accelerating (pass through) and this is not good news.

The Leu Turns Down Again

Romania's leu fell the most in almost two weeks against the euro today, apparently on investor concern inflation is making exports uncompetitive and the current account deficit unsustainable growth. The leu dropped today for a second day after INSEE (the Bucharest-based statistics office) said producer-price inflation accelerated in October by the most in six months. The cost of goods produced in Romanian factories and mines rose at an annual 8.2 percent rate in October, compared with 7 percent in September, according to the INSSE data. Month on month producer prices rose by 1.6 percent, up from 1.2 percent in September.




The rate of Romania's economy expansion slowed 5.7 percent in the third quarter, the second slowest pace since the end of 2005, while inflation picked up to 6.8 percent in October, the strongest rate since April 2006. The leu fell by as much as 0.9 percent today, which was the most since Nov. 22, to 3.5353 per euro at 2:30 p.m. in Bucharest, down from 3.5026 late yesterday.