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Romanians should give up ‘fancy' borrowing

Romanians should give up 'fancy' borrowing, i.e. loans for luxury products and only contract the loans they need badly, chief economist of the National Bank of Romania (BNR) Valentin Lazea told a round table debate on the Romanian foreign deficit on Tuesday.

The loans brought from abroad, by the parent-banks via the commercial banks operating in Romania finance the current account deficit, but they 'inflate' it at the same time, Lazea stressed. 'Economic literature says that a current account deficit running higher than 6 percent of GDP gives reason to worry. Romania already has it running at 14 percent of GDP. We should all be concerned with such a level which, if not corrected downwards, runs the risk of turning either into inflation or into a depreciation of the Romanian assets, which means that the car or house everyone of us owns become cheaper, or it discourages the foreign investors to bring direct investments and develop the Romanian economy', he explained. The central bank official said, however, there are reasons for optimism that the current account gap will be narrowed this year. 'Firstly, the exchange rate has already depreciated by 9 percent compared to last year's average and this situation has begun being seen in exports, but in imports too. Secondly, a better farming year might help, thirdly I hope the tax- and salary policies promised by the government function and fourthly it is possible that the foreign banks' appetite to bring loans from abroad, which finance the deficit but inflate it at the same time, be lessened by the turbulence in other countries', Lazea said. Sursa: http://www.rompress.ro

Tags: should car bnr

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