The business survey conducted by the NBR in February points to a broadly unfavorable outlook in industry for the short term, due to shrinking output and orders. The outlook for the construction sector is also not very optimistic, with subdued demand and inter-company arrears two problems frequently mentioned by participants in the survey. The periodic overhaul that will be carried out by an important private company in the oil processing industry explains part of the weakness in industry. Managers envisage personnel cuts both in industry and construction in response to the subdued economic activity. The results of the NBRs business survey are in line with the data on new orders in manufacturing released by the National Institute of Statistics. In December, new orders fell 14.2% m/m and 0.9% y/y, due to the still weak external demand from Eurozone trade partners. The industrial component of the Economic Sentiment Indicator released by the EC improved in January, but it is too early to distinguish a clear trend, due to a seesaw evolution in recent months. We maintain our 2013 economic growth forecast at 1.1% and bet on the ongoing recovery of household consumption, after hikes in public wages and pensions. A normal agricultural year (as opposed to the severe drought in 2012, which subtracted around 1.2pp from the full-year economic growth) would support real GDP in 2H13. The key rate will be kept unchanged at 5.25% throughout 2013, followed by a cut of 25bp in 1Q14. However, additional liquidity provided by the NBR to banks will lead to a decrease of 3M ROBOR to 5.5% by December 2013.

Source: bne