BNR Governor: The national currency is where it should be, excessive consumption should be avoided

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Romanians are not a unique case and they should not believe that the RON will depreciate continuously, the exchange rate being where it should be, Mugur Isărescu, Governor of the National Bank of Romania, said on Wednesday at a conference organized by the BNR and the European Investment Bank (EIB).

“We, the Romanians, are not a unique case, nor should we believe that we are a country with high inflation that could not be solved, or that the RON will constantly depreciate. You forget that we had negative inflation, even if it was determined by some fiscal policies. I believe we have got rid of lots of obsessions of the past, and we are a normal, European country,” Mugur Isarescu said.

According to the BNR Governor, the funding of enterprises is low, but the crediting has to finance efficient investments.

“We do not advocate for higher crediting, just because we want increased crediting. All we are doing is to prepare a new crisis. When the credit is funding efficient investments, it contributes to the growth of potential output. Consumption is too much stimulated and the potential GDP is left behind. We have a negative gap. This negative gap means potential for imbalances, it is seen on the external side of the balance of payments, it is seen in the future inflation, it is bad to stimulate long consumption much above what the economy produces,” Mugur Isarescu said.

The national currency has registered for the second time in the last week, the lowest exchange rate against the EUR of RON 4.5957, up by 0.98 bani (0.21%) as compared to Monday.

By stimulating excessive consumption we actually finance the jobs abroad

The economy is slightly unbalanced, and by the excessive consumption stimulation we actually finance the jobs abroad, Mugur Isarescu said.

“This risk (of over-funding), which theoretically we have to pay attention to, does not say that we should overlook it, but it is now low for Romania and we have another risk, the risk that the investments will not be funded for various reasons: poor environment, lack of confidence. If we do not fund the investments, they cannot grow and we cannot get out of this obvious imbalance. Where do we see it? In the fact that imports have been growing systematically for more than two years, faster than exports, so it is clear that the economy is slightly unbalanced, not to say more. By stimulating excessive consumption, we actually finance the jobs abroad, let’s fund the domestic jobs, let’s fund investments and create jobs,” Isarescu said.

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