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May 16, 2021

BNR’s Isarescu: Country risk not exclusively depending on macroeconomic indicators; populist measures to affect rating

The country risk of Romania can be influenced negatively by measures which undermine the contractual discipline, the payment discipline or the financial discipline, but the connection between the rating and the state’s funding costs isn’t sufficiently well explained to the large public of Romania, Governor of the National Bank of Romania (BNR) Mugur Isarescu claims.

“The county risk doesn’t exclusively depend on the macro-economic indicators. It includes many hard to define aspects such as the respect that society has, fundamental principles of the rule of law and market economy. Therefore, it is expected that such an assessment to be negatively influenced by measures which undermine the contractual discipline, the payment discipline, the financial discipline, the essential disciplines after which the market economy functions and which place under question mark the macro-economic balances obtained with substantial efforts,” the BNR Governor explained in a conference regarding the country risk.

He mentioned, in this context the legislative initiatives which had an impact on the financial system, such as the debt discharge Law and the Law regarding the conversion of Swiss-franc loans.

According to the governor, the link between the rating and the state’s and all companies’ funding costs is scarcely known by the public.

“Certainly institutions such as the ones that organized the today’s conference (Coface and a financial newspaper – e.n.) are well positioned in order to bring to the public opinion these details. A 0.1 – 0.2 percentage points in the funding costs of Romania represent tens and hundreds of million Euros saved or additionally paid. It is only up to certain institutions of the state, but also to market people to make aware the Romanian consumer and the ones who enjoy a brief advantage also about the associated costs of several populist steps,” the BNR governor underlined.

The head of the central bank mentioned is important for the messages regarding the financial stability and economic sustainability to reach the wide public.

He reiterated that Romania is in the best macro-economic situation of the past 26 years, but there are also numerous and large risks.

In these conditions the BNR official sees as a priority the macro-economic balance protection,”as the apple of one’s eyes”, because any subsequent adjustment would be painful. Important as well are the stimulation of economic growth potential through structural reforms and maintaining financial stability.

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