Romanians move their savings in hard currencies on lower confidence in RON

Romanians have steadily moved their savings from RON accounts into hard currency accounts since the beginning of this year, a trend that could be associated with lower confidence in the local currency following the steep depreciation registered in January, according to fresh central bank data.

Bank deposits in RON have become less attractive during the last couple of years as a consequence of low – and real negative – interest rates, currency depreciation and high inflation rate.

In June, RON-denominated deposits of residents (individual clients and companies) declined by 0.6 percent month-on-month to RON 220 billion and the annual growth rate slowed to 5.1 percent, from 6.8 percent in December 2018, central bank data show.

Forex-denominated deposits rose by 1.5 percent month-on-month in June to RON 116.9 billion-forex equivalent, and by 12.9 percent year-on-year.

During the last couple of years, Romania’s bank clients increased their creditor status against banks due to strong savings and weak credit market, deposit holders being technically the banks’ creditors.

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In January, bank deposits of households and businesses totaled RON 337 billion and exceeded loans by 30 percent.

Almost 4 out of 10 Romanians (39 percent) have no savings and are forced to cut spending or borrow money from friends or family, a ING international study recently showed.

In Europe, more than one in four (27 percent) people say their household has no funds put aside. The shares are similar in Australia and the USA.

In the same time, Bank loans in RON granted to individuals rose by 1.3 percent month-on-month and by 13.8 percent year-on-year in June, up to a fresh all-time high of RON 101.2 billion despite higher interest rates.

Companies also increased their borrowings in June as the RON corporate credit granted by local banks rose by 1.3 percent month-on-month to RON 71.6 billion.

Bank loans granted to individuals and corporate clients in Romania rose by 0.8 percent month-on-month and by 7.1 percent year-on-year in June, to RON 259.6 billion.

During the last 12 months (June 2018-June 2019), forex-denominated loans rose by 2.4 percent, to RON 86.8 billion-forex equivalent.