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Voinea (BNR): Good macroeconomic situation, significant financial stability risks; prudence is essential
Romania is in a stable macroeconomic situation but financial stability risks are significant. So a prudent behaviour of the mix of macroeconomic policies is essential, according to the Report on financial stability presented on Tuesday by deputy governor of the National Bank of Romania, Liviu Voinea.
“Romania has high economic growth, a sustainable current account deficit and dropping foreign debt. The number of employees is rising, people’s incomes have grown and export competitiveness has continued to grow. Although macroeconomic situation is good, financial stability risks are significant and a prudent behaviour of the mix of macroeconomic policies is essential,” the BNR deputy governor said.
According to him, Romania’s economic situation has registered one of the highest growth rates at European level. “The main economic growth factor was accelerated consumption due to salary increases and measures of fiscal relaxation. Net exports of goods and services has increase its negative contribution to GDP dynamics, but is within limits,” Voinea explained.
According to the BNR official, economic growth is sustainable, in the sense of covering demand excess in the domestic offer.
At the same time, contagion risk in the banking sector continued to drop, the reduction of foreign financing being compensated by the growth of local deposits, the solvability of the banking sector is high, cash flow continues to be adequate and profitability has consolidated.
At the same time banks have continued to rid their reports of non performing credits, their rate reaching 10%, the stock of credits in lei has grown and there is a consolidating tendency, the report shows.
Moreover the central bank says the risk of budget construction and execution in 2016 has partially materialised in the sense that budget deficit at the end of the year will be higher than in 2015 but lower than the initially foreseen level.
“Consolidating responsible budget policies by ensuring increased predictability as well as avoiding procyclic mixture of macroeconomic policies are essential elements for maintaining economic balances and supporting financial stability in the following period of time,”the report shows.
However the risk of rapid deterioration of investors’ confidence in emerging economies maintains at high level, because of high uncertainty about economic growth at global level, the increase of geopolitical tension in the world and modest evolutions of the main emerging countries (China, Brazil, Russia).
“Romania has now a stable position: the need for foreign financing can be managed, financing risk is low, financing costs are small, contagion risk is low and financial reserve at the disposal of the Ministry of Public Finance is consistent. However, Romania can feel pressure if investors suddenly change perception on emerging economies,” Voinea said.