NATIONAL BANK OF ROMANIA 1

CONTENTS ª Achievements of the NBR in 2005-2006 ……………………...3 ª Macroeconomic Developments …………………………….....4 ª External Sector ……………………………………………….…16 ª Exchange Rate Regime …………………………………..…....24 ª Fiscal Position ……………………………………………….….27 ª Banking System …………………………………………..…....29 ª Euro Adoption …………………………………………….…….41

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Achievements of the NBR in 2005-2006 ¾ Adoption of a new monetary policy strategy: direct inflation targeting (August 2005) ¾ Full liberalisation of capital account and full convertibility of domestic currency (September 2006) ¾ Redenomination of domestic currency (July 2005) ¾ Completion of implementation of the Electronic Payment System (October 2005) NATIONAL BANK OF ROMANIA 3

Macroeconomic Developments

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Recent Macroeconomic Developments (1) ¾ CPI inflation: 9 Annual rate: 4.87% (Dec. 2006./Dec. 2005) 3.66% (Mar. 2007/Mar. 2006), a record low for the post-1990 period 9 Average annual rate: 6.56% in 2006

¾ GDP growth: 7.7% in 2006 ,based on increases in final consumption by 11.5% (private consumption grew 12.6%) and in investment by 16.1%; the projection for 2007 is 6.5% ¾ Current account deficit: EUR 10 bn., in 2006 up 44.8% yoy (10.3% of GDP); 90.8% covered by FDI Jan.-Feb. 2007: EUR 2 bn., up 166% yoy; 42.5% covered by FDI NATIONAL BANK OF ROMANIA 5

Recent Macroeconomic Developments (2) ¾ Foreign Direct Investment: 9 2006: EUR 9.1 bn., up 72.8% yoy 9 Jan. - Feb. 2007: EUR 0.9 bn., lowered by 27.7% yoy

¾ Fiscal balance: 9 2006: -1.7% of GDP; 9 2007 program: -2.8% of GDP; 9 Jan. - Mar. 2007: -0.12% of projected GDP

¾ International reserves at record level (foreign currency and gold): 9 2006: EUR 22.9 bn.; forex reserves EUR 21.3 bn. 9 May 2, 2007: EUR 22.9 bn.; forex reserves EUR 21.2 bn. (covering about 4.9 months of prospective goods-and-services imports) NATIONAL BANK OF ROMANIA 6

50 45 40

Inflation Rate

percent

50

target (Dec./Dec.)

45.7

45

actual (average)

40.7

40

actual (Dec./Dec.) 34.5

35

35

30.3

30 25

30 25

22.5

20

20 17.8

15

15.3 14.1

10

9.3

5 0

15

11.9 9.0

10

8.6

6.6 4.87 5 ±1pp

2006

27

25

22

14

9

7.5 ±1pp

2000

2001

2002

2003

2004

2005

5 4 ±1pp

3.8 ±1pp

0

2007 2008 March 2007: 3.66% (yoy)

Source: National Institute of Statistics, National Bank of Romania

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Inflation Forecast 7

annual percentage change annual inflation rate (end of period) target band*

6

target 5

4

3

Inflation targets (Dec./Dec.) 2006: 5% 2007: 4% 2008: 3.8%

2 2006 2007 IV I II III IV I *) ±1 percentage points around the (dis)inflation path

II

III

2008 IV

2009 I

Source: National Institute of Statistics; National Bank of Romania calculations

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Inflation Rate 30

contribution to inflation rate; percentage points market prices excluding volatile prices

25

volatile prices administered prices

20 15 10 5 0

Jan.07

Oct.06

Jul.06

Apr.06

Jan.06

Oct.05

Jul.05

Apr.05

Jan.05

Oct.04

Jul.04

Apr.04

Jan.04

Oct.03

Jul.03

Apr.03

Jan.03

Oct.02

Jul.02

Apr.02

Jan.02

-5

Source: National Institute of Statistics; National Bank of Romania calculations

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Real GDP annual percentage change 8.5 7.7 6.5 5.7 5.1

5.2 4.1

2.1

2000

2001

2002

2003

2004

2005

Source: National Institute of Statistics; National Commission of Prognosis

2006

2007* *) forecast

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GDP by Source percent industry 24.1

23.9

8.5

8.1

6.3

7.0

agriculture and forestry

construction 49.4

49.6 services

11.7

11.4

others

GDP Growth: 2005: 4.1%

2006: 7.7%

Source: National Institute of Statistics

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GDP by Expenditure percent change in stocks

78.5

78.8

9.9

9.1

23.1

24.6

-10.3

-12.1

-1.1

-0.4 GDP Growth:

2005: 4.1%

actual final consumption of households actual final consumption of general government gross fixed capital formation

net exports

2006: 7.7%

Source: National Institute of Statistics

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Industrial Output annual percentage change 8.3 7.1

7.1

5.3 4.3 3.1 2.0

2000

2001

2002

2003

2004

Source: National Institute of Statistics

2005

2006

Jan.-Feb. 2007: 7.4%

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Gross Fixed Capital Formation (GDP component) annual percentage change 16.1

12.6 11.1

10.1 8.2

8.5

2002

2003

5.5

2000

2001

2004

2005

2006

Source: National Institute of Statistics

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Household Consumption (GDP component) annual percentage change 12.8

12.6

9.1 8.2 6.8 4.8

0.2 2000

2001

2002

2003

2004

2005

2006

Source: National Institute of Statistics

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External Sector

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Current Account Balance/GDP

percent

-3.3

-3.7

-5.5

-5.8

-8.4

-8.7 -10.3

2000

2001

2002

2003*

2004*

2005* 2006* *) including reinvested profit

Source: National Institute of Statistics; National Bank of Romania

2006: provisional data

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Trade Balance 4,000 3,500

(monthly data)

EUR million exports fob

imports fob

EUR million trade balance

4,000 3,500

3,000

3,000

2,500

2,500

2,000

2,000

1,500

1,500

1,000

1,000

500

500

0

0

-500

-500

-1,000

-1,000

-1,500

-1,500

-2,000

-2,000 2000

2001

2002

2003

2004

2005

2006 2007 Feb.

In February 2007, yoy growth of exports and imports in RON was 5.9% and 23.7% respectively.

Source: National Institute of Statistics

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Current Account Deficit Financing via FDI 1.5

EUR billion 0.1

1.0 0.5

0.1 1.2

0.9

0.0 -0.5

-0.8

-1.0 -1.5 -2.0

-2.0 capital transfers foreign direct investment current account balance

-2.5 Jan.-Feb. 2006

Jan.-Feb. 2007

Current account financing via FDI (including capital transfers) amounted to 45.1% in Jan.-Feb. 2007 vs 167% yoy. In Jan.-Feb. 2007, net FDI lowered by 27.7% yoy.

Source: National Bank of Romania, National Institute of Statistics

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Foreign Trade by Group of Commodities 100%

Exports

Imports

100%

textiles, wearing apparel, footwear 80%

80%

base metals

60%

mineral products

60%

40%

machinery, equipment and transport means

40%

chemical and plastic products

20%

20%

other 0%

0% 2003 2004 2005 2006 2007*

2003 2004 2005 2006 2007*

In January 2007, yoy growth rate of exports of machinery, equipment and transport means was 36.4%; share of imports thereof in total imports remained broadly unchanged at 37.1%.

*) January

Source: National Institute of Statistics

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Foreign Trade by Group of Countries* Exports

Imports

EU-26 76%

EU-26 76%

other countries 10%

other European countries 14%

other countries 8%

Source: National Institute of Statistics

other European countries 16% *) January 2007

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Gross International Reserves 26

Gross Official Reserves

EUR billion

EUR billion

banks' foreign exchange reserves NBR foreign exchange reserves gold

24 22 20

NBR foreign exchange reserves

26 24 22 20

gold

18

18 16 14

16 14 12 8

8

6

6

4

4 2 0

2

2006

2005

2004

2003

2002

2001

2000

2006 2007 Feb.

2005

2004

2003

2002

2001

2000

0

2007 2 May

10

12 10

2 May 2007: NBR forex reserves equalled EUR 21.2 bn. and gross official reserves EUR 22.9 bn. Source: National Bank of Romania

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Public Debt Stock 40

(IMF methodology)

percent of GDP

percent of GDP

40

domestic public debt/GDP 35

foreign public and publicly guaranteed debt/GDP

32.1 29.1

30

28.9

30 25.96

9.3 7.9

25

7.7 5.83

20

25

22.1 20.0 5.9

17.9 5.6

15 10

7.3 22.8

35

21.2

21.2

20 16.1 15 6.7

20.13

10 16.2

14.4 10.6

5

9.4

0

5 0

2000

2001

2002

2003

2004

2005

2006

Source: Ministry of Public Finance, National Bank of Romania, National Institute of Statistics

2007* *) January

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Exchange Rate Regime

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Liberalization of International Flows ¾ 1998: Current account operations (Art. VIII of IMF Articles of Agreement) ¾ 1999: Medium- and long-term capital inflows ¾ 2001-2002: Capital flows with low impact on the balance of payments ¾ 2003-2004: Capital flows with significant impact on the real sector ¾ 2005-2006: Capital flows with significant impact on the balance of payments ¾ September 2006: Full convertibility of the national currency NATIONAL BANK OF ROMANIA 25

1.5

2.5

4.5

Source: National Bank of Romania

Jan.06 Apr.06 Jul.06 Oct.06 Jan.07 2 May 07

RON/EUR

Jan.02 Apr.02 Jul.02 Oct.02 Jan.03 Apr.03 Jul.03 Oct.03 Jan.04 Apr.04 Jul.04 Oct.04 Jan.05 Apr.05 Jul.05 Oct.05

Jan.00 Apr.00 Jul.00 Oct.00 Jan.01 Apr.01 Jul.01 Oct.01

Nominal Exchange Rate (daily data)

2.0

NBR's decision to pursue a more flexible exchange rate

3.0

3.5

4.0

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Fiscal Position

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General Government Deficit /GDP (IMF methodology)

percent

-0.8

-1.5

-1.7

-2.2 -2.6 -3.2 -4.0 2000

2001

2002

2003

Source: Ministry of Public Finance, National Institute of Statistics

2004

2005

2006

Jan.-Mar. 2007: -0.12% of projected GDP

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Banking System

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Banking Sector - the Main Component of Financial System 60

percent of GDP bank assets

50

insurance premiums* leasing (value of contracts)*

40

market capitalization

30

20

10

0 2000

2001

2002

2003

2004

2005

2006

*) estimate for 2006 Source: Bucharest Stock Exchange, Rasdaq, Insurance Supervisory Commission, Bank Leasing Association, NBR, NIS

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Main Features of the Romanian Banking System*) Features

Shareholding Structure of Credit Institutions in Romania

¾ 38 banks (of which 7 foreign bank branches )

(% in total assets) 5.5%

5.9%

¾ Total bank assets: EUR 50.9 billion ¾ 60.3% of bank assets held by top-five banks ¾ Solvency ratio: 17.3% ¾ Foreign entities account for the largest part of shareholding *) December 2006

88.6%

credit institutions with majority state-owned capital credit institutions with majority domestic privately-owned capital credit institutions with majority foreign capital (including foreign bank branches)

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Foreign Equity Weight in the Capital of Banks in Romania December 2006

Foreign Equity Percent of total foreign capital

Percent of total capital

Austria

32.7

23.9

Greece

22.5

16.4

Netherlands

10.1

7.4

Italy

9.2

6.7

Hungary

6.4

4.7

France

6.0

4.4

Cyprus

2.2

1.6

Germany

1.8

1.3

Other EU countries

2.0

1.5

Total EU

92.9

67.9

USA

2.1

1.6

Other countries

2.8

2.0

EBRD

2.1

1.5

IFC

0.1

0.1

100.0

73.1

Total

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Analysis Ratios for the Banking System 35 30

percent

percent 28.2

253.6

25

21.2 20.6

17.9

20

12.5

10.3

10

17.3 18.3

15.6

15.6

12.7 10.7

3.3

0

2.7

2.0

2.0

2.1

past-due and doubtful claims / own equity (right-side scale)

200 150

31.2

5

250

21.1

21.8

15

-5

300

25.0

23.8

350

1.4

1.6

12.5 2.1

1.0

100

solvency ratio 1 (>12%)

50 0 -50

-10

-100

-15

-150

-15.3

-20

ROE (net income / total equity)

Feb.07

Dec.06

Dec.05

Dec.04

Dec.03

Dec.02

Dec.01

Dec.00

Dec.99

Dec.98

-200

Source: National Bank of Romania

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Banking Indicators 70

percent

70

investment and loans with other banks/ total assets

60

60

loans granted to clients/ total attracted and borrowed sources loans granted to clients/ total assets

50

50

Feb.07

Dec.06

Dec.05

Dec.04

Dec.03

20 Dec.02

20 Dec.01

30

Dec.00

30

Dec.99

40

Dec.98

40

Source: National Bank of Romania

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Financial Intermediation* 30

percent of GDP 27.2

25 21.1 20 16.9 15.3 15 11.8 10

9.3

10.1

5

0 2000

2001

2002

2003

Source: National Institute of Statistics; National Bank of Romania

2004

2005

2006

*) non-government credit/GDP

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30

Financial Intermediation*

percent of GDP

27.2 companies 25

households

21.1

foreign currency 20

12.8

RON

15.7

16.9 15.3 11.4

15

13.7

11.8 10

9.3 5.5

5

8.8

10.1 11.5 6.0 9.4 4.1

3.8 0.7

0 0.5 2000

8.5

2001

12.1

10.3

7.4

14.4

10.4 4.4 1.4 2002

6.8 3.8 2003

4.8

7.4

6.6

2004

Source: National Bank of Romania, National Institute of Statistics

9.7

2005

11.5

2006

*) non-government credit/GDP

NATIONAL BANK OF ROMANIA 36

Inflation Rate and Interest Rates 32

percent

percent

32

0

0

inflation rate (percentage change against the same year-earlier period) NBR policy rate NBR average interest rate on stock of sterilization operations (% p.a.)

inflation rate (percentage change against the same year-earlier period)

Jan.07

4 Jul.06

4 Jan.06

8

Jul.05

8

Jan.05

12

Jul.04

12

Jan.04

16

Jan.07

16

Jul.06

20

Jan.06

20

Jul.05

24

Jan.05

24

Jul.04

28

Jan.04

28

average interest rate on RON-denominated loans to non-financial corporations and households (% p.a.)

average interest rate on RON-denominated time deposits from non-financial corporations and NBR policy rate: 7.5% starting with March 27, 2007 households (% p.a.) Source: National Bank of Romania, National Institute of Statistics

NATIONAL BANK OF ROMANIA 37

Short- and Medium-Term Objectives in Prudential Regulation (1) ¾ Promoting measures to expand financial intermediation based on a banking system which is 9 modern and sound 9 adequately regulated from a prudential perspective 9 efficiently supervised

leading to the avoidance of sectoral disequilibria and contributing to lasting macro-stability

NATIONAL BANK OF ROMANIA 38

Short- and Medium-Term Objectives in Prudential Regulation (2) ¾ Monitoring financial stability 9 Concept: a stable financial system should be capable of ensuring efficient resource allocation, absorbing potential shocks and preventing them from having a detrimental effect on real economy 9 Ensuring financial system stability has become an essential prerogative of the central bank, supportive of its primary objective, i.e. to ensure price stability NATIONAL BANK OF ROMANIA 39

Short- and Medium-Term Objectives in Prudential Regulation (3) ¾ Enhancing the quality of supervision 9 Greater involvement of credit institutions’ executives in risk management 9 NBR regulations will be better tailored to the specific risk profile of each credit institution 9 Shift to consolidated supervision requires assessment of a credit institution’s financial standing based on prudential indicators calculated at a consolidated level

9 Implementing the primary and secondary legislation approved in 2006 with a view to apply Basel II Accord starting 2008 NATIONAL BANK OF ROMANIA 40

Euro Adoption

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Euro Adoption (1) 1. For 2007-2012 ¾ Consolidation of low inflation (sustainable disinflation) ¾ Establishment of domestic market for long-term capital and interest rate convergence ¾ Relative stability of the RON exchange rate (amid full convertibility) around the long-term equilibrium level (sustainable exchange rate) NATIONAL BANK OF ROMANIA 42

Euro Adoption (2) 2. ERM2 entry is planned for 2012 in order to: ¾ Provide a time period necessary for: 9 Sustainable fulfillment of nominal convergence criteria 9 Achievement of a satisfactory level of real convergence

3. Euro zone entry 2014

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