Romania, still in the post-crisis stage: lending remains low

The specifics of any economy that has passed through a crisis: lending remains weak, even if new loans began to grow. In other words, Romania is still in the post-crisis stage, Lucian Croitoru adviser of the Romanian National Bank Governor explained on Tuesday, Agerpres informs.
Whenever it happens a boom in the emerging economies, it follows a deep crisis. After the break of such bubbles occurs, it follows several years in which lending remains very low, although production resumes, “said Croitoru during a press conference.
According to central bank data, at end-September 2014, non-government loans granted by credit institutions inched down 0.2 percent (down 0.3 percent in real terms) from August 2014 to RON 213,069.5 million. RON-denominated loans increased by 0.6 percent (0.4 percent in real terms), whereas foreign currency-denominated loans fell by 0.8 percent when expressed in either RON or EUR. At end-September 2014, non-government loans decreased by 4.5 percent (down 5.9 percent in real terms) year on year, on the back of the 7.6 percent increase in RON-denominated loans (5.9 percent in real terms) and the 12.0 percent decline in foreign currency-denominated loans expressed in RON (when expressed in EUR, forex loans dropped 11.0 percent).
An inflation target of 3 percent is more suitable for Romania than one of 2 percent, because real interest rates continue to be an incentive for the economy.
In this context, he argues that prevention is needed by setting an inflation target not to allow the real rate interest to enter on a negative territory, but also measures to stimulate demand and potential. These include increasing labor force participation, investments’focusing on transport infrastructure, clarifying property rights, continuing the fight against corruption and problem solving in the public sector. In his view, only once these measures have been resolved it will be a strong middle class.

BNRforeign currencyinflation targetlendingLucian Croitorumiddle classnon-government loanspost-crisis stagepublic sectorrate interestRON
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