Romania’s economic growth is high, current account deficit sustainable, central bank says
Romania’s macroeconomic development has been good, but threats to its financial stability are still severe. Against this background, a careful use of the policy mix is essential. These are conclusions highlighted by the latest report on Romania’s financial stability, presented by the National Bank Deputy Governor Liviu Voinea. The main risk is that investors’ trust in emerging economies might drop fast. There are, however, other risks as well, such as the unpredictability of the financial and banking sector, a lack of clarity as to how the budget is built and concerns about the future of the EU.
Liviu Voinea: “Romania is in a favourable macroeconomic situation, and the risks have diminished. However, there are still many significant threats facing the economy, and that is why the minister in charge of macroeconomic policies should be very careful. As regards the banking sector, it has the ability to cope with unfavourable developments. The solvability rate has remained high, standing at 19% in September 2016, profitability is strong and liquidity is no longer a constraint for banks. All these against the background of a provision coverage rate above the EU average.”
According to the Central Bank official, the Romanian economy has registered lately one of the highest growth rates in Europe. Liviu Voinea has explained that the positive dynamics of the economy is sustainable, because most of the surplus demand of the 2011-2016 period has been covered by the domestic supply.
Another conclusion of the report is that the risk posed by legislative instability in the financial-banking sector has lowered, thanks to the decision made by the Constitutional Court regarding the debt discharge bill. In April, the legislative initiatives concerning the discharge of debts and the conversion of loans in Swiss francs were seen as a serious threat.
Liviu Voinea: “Banks will cover their losses in keeping with a multi-year schedule, as a result of the Constitutional Court ruling, and as long as decisions are made on an individual basis, the two laws can no longer be considered loss-incurring events, for the purposes of the European regulations regarding provisions.”
Under the debt discharge law, clients who have contracted mortgage loans of maximum 250,000 Euros and can no longer make their payments to banks, may choose to no longer pay the instalments and give up property rights over the respective asset. As regards loans in Swiss francs, they can be repaid in the Romanian currency, at the exchange rate valid on the date on which the contract was signed.