The macro-economic tensions which surfaced given the GDP growth over its potential and the over-indebtedness of the population, as interest rates are expected to be increased, are the main risk factors, the National Bank of Romania ‘Report on Financial Stability’, presented on Monday, reads.
The economy grew driven by consumption and it grew over its potential, an issue which deepens the ‘twin deficits’, i.e. the fiscal deficit and the current account deficit. The fiscal policies were ‘expansionist’, meaning that the “fiscal space achieved by the relaxation in 2016 has been depleted in 2017,” Deputy BNR Governor Liviu Voinea said.
The BNR official added that the economic imbalances influence the interest rates, the exchange rate and inflation. For this reason, the indebtedness of the population is growing – given the growing interest rates – and this is one of the risks mentioned by BNR for the financial stability. Voinea mentioned that the macro-economic tensions and the over-indebtedness of the population are average-intensity risks, stressing that “Romania is not facing high systemic risks for the financial stability.”
In regard to the over-indebtedness of the population, Liviu Voinea said most of the loans granted in recent years have variable interest rates, which aggravates the situation. He recommended the future borrowers to contract new loans with fix interest rate.
In his turn, Eugen Radulescu, Director of the Directorate for Financial Stability with BNR, pointed to the fact that an increase by two percentage points of the interest rate for mortgage loans has increased the low income borrowers’ indebtedness from 65% to 75% of their revenues, which becomes hard to bear. “Currently, BNR envisages ways to cap the share between the monthly rates and the borrowers revenues, to that it remains bearable,” Radulescu said.
Among the other risks for financial stability, the BNR report mentions “the fall of investors’ confidence in emerging economies (considered ‘high’ risk), the low corporate payment discipline (‘medium’ risk) and the acceleration of real estate price hikes (‘low’ risk).