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Florin Citu:the nonperforming credits can lead Romania to a negative spiralling of economic growth
Non performing credits could grow over the period to come, with negative impact on the Romanian economy which could enter a negative spiralling of economic growth, warns the economist Florin Citu. The risks of nonperforming credits are two – the risk on the stability of the banking system, if it is materialised in too high costs for the banks, and the risk on economic growth, Florin Citu stated on Monday at a conference organised by the economic weekly Finantistii.
Low economic growth leads to the increase of the rate of nonperforming credits, but there is a perverse effect – from a certain threshold the rate of nonperforming credits influences negatively the economic growth, getting into a negative spiral of nonperforming credits – low economic growth, the economist Florin Citu warned.At present, the rate of nonperforming credits is 17 -18% and BNR estimates a growth to 20%.
When referring to the period 2007 – 2009, Citu mentioned that, although the interest rates went up for the credits in lei, the demand increased as well, and those in euro, the demand increased irrespective of the evolution of interest rates.
‘My worry is that when they had a credit in foreign currency, the Romanian consumer did not take into consideration the cost ( less in the case of credits in euro) he only wanted to get a credit’ Citu said.
He appreciated that the offer and the demand for credits for that period were over-dimensioned as the Romanians noticed some change in the economy – the drop in unemployment, the growth of economy, of income, the appreciation of the leu- which he perceived as permanent structural changes.
‘Here he helped us the thing that we were told that we were going to access the euro in 2012, in the Romanians’s mind a series of information were implemented (..)I hope not to drop in the same trap today when we are told about the direct translation to financing in RON, to believe we are in a permanent balance, that this is the new balance, with the risk of getting something interesting, which would get us on the wrong foot’ Florin Citu.