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Lazea: Romania avoided a dramatic recession

Romania avoided a dramatic recession, like the one in the Baltic States, thanks to the flexible exchange rate, the chief economist of the National Bank of Romania (BNR), Valentin Lazea, said at the Central and Southeast European central financial forum from Bucharest, Agerpres reports. The depreciation of the national currency from RON 3.8 to 4.3/Euro has eased the pressures from the real economy, but additional depreciations of the RON should be avoided in the coming period, Lazea said.

According to Lazea, BNR will have more attributions requesting the banks with problems to make changes in the management or the shareholding structure. There isn't a systemic risk, but the Central Bank can impose recapitalizations or changes in the shareholding to the banks, as the case may be, the BNR official said. He stressed that the recapitalization of a bank with problems will not be made from public money.

The big weight of the foreign banks in a banking system is perceived as a disadvantage, although in the past years it was considered an advantage, Lazea estimates. From this point of view, Romania ranks four out of 11 Central and East European states, with a presence of foreign banks of 88 per cent of the total, after Estonia - 97 per cent, the Czech Republic - 97 per cent, and Croatia - 91 per cent. As for the foreign banking debt, Romania ranks 7, with a level of 20 per cent of GDP, while in terms of credits in foreign currency it ranks five, such credits having a weight of 58 per cent of the total.

Lazea mentioned that the banks must get recapitalized in order to fulfil the new solvency demands, from eight to 10 per cent, and added that in the conditions of the financial crisis, the foreign exchange reserves of a central bank are no longer evaluated according to the coverage degree of imports but according to the coverage of the short term debts. In Romania, this degree of coverage of the debts (next year included) was 99 per cent. According to Lazea, during the next period the coverage degrees will improve but not very quickly. The agreement between the banks from Romania and the parent-banks is a gentleman agreement, the chief economist of BNR, Valentin Lazea, also said at the financial forum.

Significant reduction of monetary policy interest rate, damaging

The dramatic relaxation of the monetary policy interest rate, by 2-3 percentage points, would be more damaging in regard to inflation than helpful in regard to the economic growth, Lazea further said. The result could be a mix of all evils - economic fall and high inflation (stagflation), Lazea said. Lazea mentioned that in April the annual inflation in Romania reached 6.45 per cent, the highest level in EU27, after in 2008 Romania was ranking five with an inflation of 6.3 per cent, after the Baltic States and Bulgaria.

Dijmarescu: Rating agencies could review Romania's prospects at year end

The rating agencies could review the prospects of Romania until the end of the year, further to the enforcement of the provisions of the agreement concluded with IMF, BNR vice governor, Eugen Dijmarescu, said at the Central and South European central financial forum. "The rating agencies could review the prospects of Romania, until the end of the year, further to the enforcement of the provisions of the agreement concluded with the International Monetary Fund. But, the enforcement of these provisions is not enough," he stated.

 

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Tags: central banks foreign lazea bnr avoided dramatic romania euro

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