The net wealth of Romanians stood at the end of 2020 at an all-time high, increasing by 6.1% compared to the previous year, according to the Financial Stability Report released by Romania’s central bank – NBR on Thursday. Three quarters of the wealth consists of houses and apartments (real estate assets) and only a quarter of the wealth is represented by financial assets. This is largely due to legislation that encourages the holding of real estate assets rather than (re) investing in productive activities, the report further states.
The value of houses and apartments increased by 4.8% in Q4 / 2020 compared to Q4 / 2019, amid the increase in the real estate price index and the depreciation of the national currency, indicating the resilience of the real estate market.
Financial assets represent about 24% of the total, unlike the euro area, where they represent about 45% of the population’s wealth, with a growth rate of 8.8% for the period under review. This gap highlights the low capacity to mobilize domestic capital and the dependence on attracting foreign capital.
In the structure, among the financial assets, the population is prone to secure instruments, such as cash and deposits (representing about 39% of the total financial assets of the sector), and next by investments such as private pensions.
The real growth rate of deposits and cash (14% as of December 2020) has brought them to 30% of GDP, the highest share in 14 years.
However, the National Bank of Romania mentions the polarization of savings: according to data published by the Bank Deposit Guarantee Fund, only 0.3% of deposits exceed the guarantee ceiling of EUR 100,000, representing 22% of the total value. Their share has registered an upward trend in recent years, reaching the maximum of the last 10 years, signaling an increase in inequality and polarization of the population’s wealth.
The NBR Board decided to reduce the monetary policy rate fourfold since the outbreak of the COVID-1929 pandemic, with adjustments totaling 1.25 percentage points. Due to the high proportion of variable interest loans as well as the long maturity of mortgages, the decrease in the monetary policy rate is likely to have a positive impact on the demand for new mortgages, also leading to a lower debt service for borrowers. who have already taken out a loan.