Romania's economic indicators signal headwinds: Industrial PPI and foreign-owned companies down

According to Romania's statistical office, INS, in November 2023, the southeastern European country witnessed a 2.55 per cent y-o-y decline in industrial producer prices, primarily attributed to a decrease in the mining and quarrying sector.

Despite this annual dip, there was a slight monthly increase of 0.2 per cent, as indicated by provisional figures.

Industrial PPI

Taking a closer look at the numbers, on the domestic market, industrial producer prices experienced a 3.31 per cent y-o-y decrease in November 2023. On the external market, prices also edged down, showing an annual decline of 0.64 per cent. The 7.96 per cent y-o-y drop in energy prices is noteworthy, while intermediate goods saw a 4.93 per cent decline.

Capital goods, on the other hand, exhibited a 5.49 per cent annual increase. Durable and non-durable consumer goods also witnessed price hikes, with increases of 3.9 per cent and 6.07 per cent, respectively.

The provisional data for Romania's industrial producer prices in November 2023 indicates a percentage change of:

What Romanian aluminium company Alro reported

Alro Group stated in August 2023 that it concluded the first half of 2023 with a net loss of 164 million lei ($36.4 million/33.1 million euro approx.). This marks a significant downturn from the net profit of 15.3 million lei reported during the same period last year.

During the review period, Alro's turnover declined to 1.55 billion lei, down from 2.1 billion lei in January-June 2022, as stated in the company's press release. Alum's temporary shutdown and the decline in aluminium prices on the London Metal Exchange are cited by Alro as the reasons for the decline.

In November 2023, Alro reported a widened consolidated net loss, reaching 394 million lei ($84.7 million/79.3 million euros) for the initial nine months of 2023, compared to the 110 million lei recorded in the corresponding period of the previous year.

The increased loss was attributed to several factors, including reduced aluminium prices on the London Metal Exchange, decreased demand at the European level, and heightened local utility costs, as outlined in a press release from Alro.

During the January-September period of 2023, Alro's consolidated turnover experienced a notable 21% year-on-year decline, amounting to 2.24 billion lei.

From January to November, new foreign-owned companies fell by 6 per cent

As per the Trade Office Registry's data released on January 4, 2024, in the initial eleven months of 2023, establishing new businesses in Romania backed by foreign capital witnessed a 6.2 per cent y-o-y decline, totalling 6,447. During this period under review, the foreign capital injected into these novel enterprises surged significantly, reaching $123.4 million (112.9 million euros), marking a remarkable 3.2-fold increase.

In November alone, registering companies financed with foreign capital recorded a 14.5 per cent y-o-y drop, with 597 new entities established in Romania. The majority of the freshly formed companies in November were engaged in wholesale and retail trade, car, and motorcycle repairs (24.5 per cent), professional, administrative, scientific, and technical activities (20.8 per cent), and transport, storage, and communications (13.4 per cent).

Notably, companies involved in professional, administrative, scientific, and technical activities constituted 37.1 per cent of the share capital of foreign-owned companies established in November. Financial brokerage and insurance companies followed at a distant second, contributing 11.2 per cent to the share capital.

As of the end of November, Romania boasted 250,663 foreign-owned companies with a cumulative capital of $69.289 billion. Italian investors dominated the landscape with 52,677 companies. Interestingly, despite numbering only 6,073 entities, Dutch investments led in share capital, amounting to $12.9 billion or 18.6 per cent of the total aggregate.

Furthermore, data from Romania's central bank revealed a significant 36 per cent y-o-y decline in foreign direct investment (FDI) into the country during the first ten months of 2023, amounting to 6.148 billion euros.