Romanian economy steered clear of the international financial turmoil, but it will feel the indirect effects, National Bank Governor Mugur Isarescu on Monday told a press conference here.
According to the governor, the indirect effects lie in an accentuated exchange rate volatility, costlier foreign financing, dividend repatriation by foreign companies or a slowdown in exports.
Referring to the basic elements that kept local economy unaffected, Isarescu mentioned that the minimum mandatory reserves are high, allowing the gradual adjustment of liquidity in the banking system to the evolution of market conditions and that by prudential and administrative measures the central bank has constantly taken steps towards tempering the growth of lending to the private sector and supporting lending in national currency over loans on foreign currency.
The ratio of the banks' outstanding and doubtful claims to equity capital keeps low (2.78 percent in June 2008), with the bank deposit guarantee cap put up from 20,000 euros (some 25,640 U.S. dollars) to 50,000 euros starting Oct. 15, 2008, whereas the steep decline of quotations on the capital market expected to have a moderate impact on the corporative financing process, with three banks dominating the Romanian financial sector.
Referring to the potential effects of the international financial turmoil on Romanian economy, the governor mentioned the higher exchange rate volatility on the background of the significant reduction of the risk appetite of investors on emerging markets and the steady rise of costs for foreign financing, with the shrinking amounts affecting both foreign currency credits and retail lending.
He said other indirect effects on Romania could be smaller autonomous capital inflows and the possible in advance repatriation of foreign capital gains made in Romania, the deceleration of demand for Romanian exports due to less spectacular economic growth perspectives for EU member states. (1 U.S. dollar = 0.7799 euro)
Source:Xinhua
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