More expensive loans in Romania
National Bank again raises reference interest rate, resulting in higher monthly repayments of loans.
Bogdan Matei, 11.01.2023, 13:50
Romania’s
annual inflation rate went up to 16.8% in November 2022 from 15.32%
in October. This is more than the figure of 16.3% forecast for the
end of the year by the governor of the National Bank of Romania,
Mugur
Isarescu. It’s also the highest level in the last two decades: in
2002, the annual inflation rate was 22.5%, but stayed in
single-digit territory
from 2005 until 2021. In
a move expected by everyone, the managing board of the National Bank
of Romania has again raised the monetary policy interest rate by
0.25% to reach 7% per year. The central bank’s specialists believe
the annual inflation rate will probably see a slight decrease in the
first quarter of the year before falling more significantly, possibly
even below 10%, from the third quarter of the year.
The new increase
in the key interest rate will most probably lead to further increases
in commercial banks’ interest rates, especially in the case of
loans. Economic analyst Dragos Cabat told Radio Romania that it was
important for the trend to raise the key interest rate to continue,
in order to keep inflation in check and cause it to fall, even if
this means higher repayments for loans with variable interest rates
in the national currency. He says around 600,000 Romanians are
affected by the increase in the interest rate, mainly persons with
average and above-average incomes, emphasising that the biggest
problem is faced by people with low incomes struggling to afford
decent living and that as far as they are concerned, it is very
important to put an end to the steep rise in consumer prices.
The
increase in the monetary policy interest rate will lead to a halt in
private sector investments and to a wave of bankruptcies caused by
recession, warned MP and former economy minister Claudiu
Năsui from the
Save Romania Union, in opposition. He criticises the government
formed by the Social Democrats, the Liberals and the party of ethnic
Hungarians in Romania for accumulating massive debts amid
rising spending for local development and the creation of new state
agencies.
FACIAS, the Foundation for the Defence of the Citizens
against of the Abuse of the State, a non-governmental organisation
active in the public space, also believes it is outrageous that the
Romanian state, through its National Bank, has chosen to fight
golloping inflation by adding to the burdens faced by people with
bank loans. The central bank’s raising interest rates without any
other compensation measures for the population has led to an up to
60% increase in the amount of monthly repayments, the organisation
also says, adding that this financial policy, which only seeks to
help banks, will soon lead to real tragedy among the country’s
active population. (CM)
