Romania will sign a precautionary agreement with the World Bank too, the head of the IMF mission to Romania added.
The National Bank of Romania (BNR) should adopt a cautious attitude in its monetary policy, given the fact that there is the possibility of seeing a return of pressures on the RON, pressures followed by capital outflows, Jeffrey Franks, the head of the IMF mission to Romania, stated yesterday in a phone interview.
According to bank dealers, the RON withstood fairly well the latest turmoil on financial markets and did so most of the times with the help of BNR’s indirect interventions.
He also opined that BNR should not lower the banks’ minimum required reserves, in order to have a buffer in case of possible problems within the financial system.
Likewise, Romanian authorities will reach a new precautionary agreement with the World Bank next spring, similar to the one signed with the IMF, an agreement that would allow Romania to use money from the international institution if necessary, Jeffrey Franks stated, Mediafax informs. “This agreement will be an insurance policy against future financial difficulties,” Franks stated.
According to the IMF official, in the following days Romania will receive from the World Bank a EUR 400 M tranche that is part of the current agreement.
Bank collapse unlikely in Romania
The head of the IMF mission to Romania added that it is unlikely for a bank collapse to occur in Romania, pointing out that although some banks transferred money outside the country, others brought in capital, so that the banking system’s overall position remains balanced. “There are risks (…) but the scenario you describe doesn’t have a high probability of coming to be. In case of a severe problem we may extend the value of the stand-by agreement in a very short period, with the board’s approval. This was previously done in other countries too,” Franks explained.
In what concerns the risk of seeing foreign banks pulling their funds from Romania in the following period, the IMF official pointed out that some banks did lower their exposure on Romania however others hiked it, so that the impact was relatively neutral.
Structural deficit to drop to 0.1 pc of gdp in 2012, within the threshold set by EU
Likewise, Franks added that Romania’s structural deficit will drop from 2.8 per cent of GDP this year to 0.1 per cent next year, and will thus fall within the 0.5 per cent of GDP threshold that the most recent European summit has set. “When we calculate the budget deficit (in relation to GDP – editor’s note) we also calculate how much this percentage would represent if the economy were to grow at a normal rate. The result is what we call structural deficit. During periods of economic boom the structural deficit is larger than the budget deficit, but if economic difficulties appear the structural deficit becomes even smaller than the budget deficit,” the IMF official added.
Romanian authorities and international institutions have taken into account a budget deficit of 4.4 per cent of GDP this year and of 1.9 per cent of GDP in 2012.J
effrey Franks also pointed out that Romania’s economy is not growing at its full potential, which explains why the structural deficit is lower than the budget deficit. The authorities’ most recent estimates show that Romania’s economy will grow by 1.7 per cent this year, Andreea Paul-Vass, the Premier’s economic advisor, stated on Tuesday evening, Mediafax informs. In Q3 the economy grew by 1.9 per cent compared to the previous three months and by 4.4 per cent compared to the similar period last year, thus registering the highest growth in the last three years, the National Statistics Institute informs. At the end of October, the general consolidated budget registered a deficit of 2.4 per cent of GDP, down by 0.1 percentage points compared to the month before.