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October 23, 2021

Romania should diversify export markets and look even to the East, Libocor says

BRD Groupe Societe Generale chief economist Florian Libocor claims that Romania should look for other export markets too in order to make up for the consumption drop seen in the developed countries that are its partners and could turn towards the East, including towards Russia. He pointed out that Dacia Renault is the best example, being a midlevel product that has been successful in Germany and Russia alike. Libocor believes that this year it the whole economy could register the dynamic that the agriculture sector registered last year. The BRD economist estimates that the economy will grow by 2.1 per cent this year, thus confirming the process of moderate and gradual recovery, and will feature a more significant dynamic in H2. Libocor pointed out that Germany and France are Romania’s top business partners in the European Union. “If there is a negative impact, and maybe there will be, it will be a marginal one. On the other hand, in the case of foreign direct investments we will probably see a negative impact much more clearly. We expect EUR 2.8 bln, but we will probably fail to attain that target,” he added. BRD Groupe Societe Generale’s chief economist estimates that the current account deficit will rise slightly, but will remain within the 4-6 per cent of GDP range, possibly in the lower half of that range. Estimates point to a hike of approximately 0.5 per cent in the inflation rate compared to its 3.14 per cent level in 2011, given the recovery of consumption and the deregulation of regulated prices, simultaneously with the reduction of the potential GDP’s negative deviation. At the same time, Libocor estimates that the RON/EUR exchange rate will remain within a balanced range of 4.1 – 4.3 units, however the RON’s appreciation potential is limited beyond this range. For this year BRD estimates a fiscal deficit of approximately 3 per cent of GDP, above the 2.4 per cent target but below last year’s level of 4.4 per cent. According to Libocor, the deficit would be easier to lower if tax collection improves. The total public debt is estimated to grow slightly, from 39.6 per cent of GDP last year to 40.1 per cent, remaining below the limit set by the Maastricht criteria. Nevertheless, Libocor believes that the total public debt could just as well drop this year.

Poupet, BRD: In a perfect world Mr. Isarescu would be right, but this is not a perfect world

Referring to National Bank of Romania (BNR) Governor Mugur Isarescu’s statement according to which banks will have higher liquidity and should lower interest rates, BRD General Manager Guy Poupet stated that the Governor would be right “in a perfect world,” but the real world is not perfect, Mediafax informs. “In a perfect world Mr. Isarescu would be right, but this world is not perfect. The reference rate is not operational, it’s indicative, but if starting tomorrow the Governor continues to free up some bank reserves that would be very, very useful, and if he wants to do it in a foreign currency it would be even more useful, but he understands it is difficult because he has to keep the reserves at the central bank,” the head of BRD Groupe Societe Generale stated. Isarescu had stated on Thursday that the banks will have higher liquidity and will have to lower the interest rates once spring comes and the snow melts. The statement suggested that the central bank will seek to allow higher liquidity on the banking market, which will most likely be done through a reduction of minimum required reserves during the monetary policy meeting scheduled on March 29. “I share the governor’s position and if I were the governor of the central bank I would like to give exactly the same message. I believe the governor is playing his part when he says where these bank money is, he has to use them and so if we have more risk money we have to lower the monetary policy interest rate. As long as the inflation rate drops, the central bank’s reference rate drops, you effectively have to lower the interest rate and we will do it,” Poupet stated. He pointed out that each bank sets its own strategy and credit institutions are in a competition in what concerns credits and deposits. “The bank has to be profitable and in order to have a certain profitability you have to maintain a certain margin, and today if you have a high cost of risk the only way to compensate for it is to hike the commissions and margin. In what concerns the commissions – you have to launch new products in order to attract clients and doing that is not so easy today. In what concerns the margin of interests, you have volume, but the volume is limited, or you hike the margin in case you don’t lower the interest rate,” Poupet added.

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