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JP Morgan Report: Romania’s economy will drop by 3% this year

Romania's economy may drop by 3% in 2009 on the background of slower credits. According to a more pessimistic view the rate of un-performing credits at Romanian banks may reach 15-20% from less than 3% in 2008, the report shows.

"Economic growth in Romania was fed in the past year by a wider current account deficit (14% of GDP in 2007) on the background of foreign exchange credits. The state will face a painful adjustment of the current account deficit while our economists estimate a real drop by 3% of GDP, due to slower credits," a report referring to banks from Eastern Europe, published by JP Morgan shows. 'We estimate the overall capital of the banking system at about 4-5 billion euros at the end of 2008". Romanian banks reported a rate of un-performing credits under 3% at the end of 2008. In a pessimistic scenario we could see the rate of un-performing credits between 15-20%, the American analysts show. They point out that the high dependence of the Romanian banking system on foreign financing as well as the important share of foreign exchange credits in their portfolios.

BNR used to defend the leu under 4 lei/euro but has recently stopped stepping in to maintain the rate under that threshold. The depreciation of the leu affected debtors with foreign exchange credits , limited credit increase and accelerated the adjustment of the current account deficit, the study shows.

The American economists consider that Romanian authorities will request a financing packet from EU and IMF like other countries in the area.Although the depreciation of the national currency is not a reason for requesting aid, the rapid slowing down of economy and the problems concerning budget execution might determine Romania to appeal to IMF. The government abandoned most election promises in order to keep budget deficit under control, which may show it is preparing to fulfill certain conditions, the study says.

 

Sursa: http://www.actmedia.eu

Tags: credits report economy romania euro bnr

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