Industry revving its engine on sustainable demand
As a prominent figure once said, industry remains the soul of business and the key to prosperity. Indeed, industry has demonstrated its capacity to rebound much faster than other economic areas, thanks to external demand, both EU and non-EU. Positive trends in manufacturing pushed exports up staggering 28% y/y in 2010 and, starting with 3Q10, exports outside the EU grew faster than their European counterparts. Domestic demand continued to consolidate in positive territory, boosting some industries, such as durables and consumer goods, which usually rely more on the domestic market.
Motor vehicles and trailers, IT electronics and optics, electric equipment, machines and equipment and metallurgy were the main contributors to exports growth in 2010, as in the pre-crisis period. Actually, their combined share of total exports extended to 47% last year, from 42% in 2008 and thus overall Romanian exports managed to surpass pre-crisis levels by around 10%. Even though metallurgy has not fully recovered, the exports of this industry amounted to EUR 2.6bn (~7% of total exports). Despite the progress made in the recent years, exports penetration in Romania is by far the lowest, compared to some of the peer countries in the region. Productivity gains in industry made a nice recovery in 2010, advancing by 17%, but even so, Romania has a lot of catching up to do and additional FDIs are instrumental in achieving this objective.
Manufacturing is expected to go up during March and May 2011, according to local managers, while payrolls will remain relatively stable. Some activities such as metallurgy, other means of transport, chemical industry may still report declines in payrolls which could be a sign that the private sector is still restructuring. On the exports side, the only cloud on the horizon is the possibility of a temporary shutdown of local car maker production (two weeks), due to some delays in receiving the necessary parts from their Japanese suppliers. This is likely to put a damper on car exports, which roughly account for 12%, including spare parts.