The devaluation of the RON influences neither the demand, nor the offer of foreign currency loans, economist Florin Catu says.
The volume of non-government crediting declined in August by 1.6 pc against July, to RON 227.932 bln, driven by the reduction of foreign currency loans, according to data released by the National Bank of Romania (BNR) yesterday. In real terms, the volume of non-governmental crediting was 2.1 pc. Crediting in RON advanced by 0.4 pc (-0.1 pc in real terms), while the foreign currency loans (RON equivalent) went down 2.7 pc (if expressed in EUR, foreign currency crediting diminished by 0.3 pc). By August 31, 2012, non-governmental loans registered an increase of 5.7 pc (1.7 pc in real terms) compared to a year ago, driven by increases by 4.3 pc of the RON-denominated component (0.4 pc in real terms) and by 6.5 pc of the component in foreign currency expressed in RON (in EUR, foreign currency loans advanced by 0.8 pc), according to the BNR press release.On the other hand, non-governmental crediting diminished in August by 2.9 pc to RON 76.59 bln. Compared to August 31, 2011, this accounts for an 18.6 pc increase (14.2 pc in real terms).The RON deposits of legal entities (non-financial companies and non-monetary financial institutions) diminished by 0.3 pc to RON 50.965 bln. By August 31, the RON denominated deposits of legal entities were 2.8 pc bigger (-1.1 pc in real terms) than in August 2011. The deposits made by residents – non-government customers – decreased by 0.5 pc in August against July, to RON 193.722 bln. The RON denominated deposits made by the population decreased by 0.8 pc to RON 74.992 bln, and at 31 August 2012 the RON deposits of the population registered an increase of 10.6 pc (6.4 pc in real terms) against 31 August 2011.
Against July, the money supply diminished by 0.5 pc
At the end of August, the broad money supply amounted to RON 220.291 bln. Against July, it diminished by 0.5 pc (1 pc in real terms), while compared to August 2011 it advanced by 7.2 pc (3.2 pc in real terms). “The evolution of monetary aggregates, especially of foreign currency loans leads us to a stronger conclusion: the devaluation of the RON influences neither the demand, nor the offer of foreign currency loans. Hence, the benefits brought to banks by these loans are much higher than costs. In other words, the cost of such a loan is too small for individual and corporate customers, even after adding the cost of the devaluation,” Romanian economist Florin Citu explains, quoted by HotNews.ro.According to the same source, the evolution of foreign currency crediting shows that fear from depreciation is exaggerated. “In other words, BNR’s wish to keep the exchange rate stable, because otherwise the economy would collapse, has no support in real economy. At the same time, the benefits of a free-floating exchange rate are very well documented even in the Romanian economy,” the economist concludes.