BNR: A tightening of the monetary policy in Romania is not necessary in the near future

A tightening of the monetary policy in Romania is not necessary in the near future because the economy goes “through the best macroeconomic situation” since the fall of the communism and the growth is not unsustainable yet, said the vice-governor of BNR, Liviu Voinea, according to Agerpres.

The Romanian economy based on consumption doesn’t show overheating signs, also we assist to a growth over the potential, but this situation is valid since the last two quarters, said Voinea. He also added that GDP, which since 2010 is growing annually, would grow by 5 percent this year, according to BNR forecasts.

“We end the recovery process. The economic potential might grow based on the increasing absorption of the European funds, finished infrastructure projects and the increasing participation of the labor force, “ said Voinea.

According to Bloomberg, even if Romania goes through the longest period of deflation, the economy is growing because of the taxes reduction. The analysts argue that it’s an unhealthy growth and the investments were neglected. On September 30, the Administration Council of BNR decided in unanimity to maintain the interest of the monetary policy at 1.75 percent/ year, arguing that there is no “overheating sign”.

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Moreover, BNR has reduced the mandatory minimum reserves rate for the liabilities in foreign currency from 12 percent to 10 percent starting the applicability period October 24-November 23.

Even if the decision will deliver the market approximately EUR 500 million this month, the fears regarding the project law that would allow the conversion of the Swiss Franc at the historical exchange rate, determined the banks to make reserves in EUR. This is why the RON depreciated by 1.5 percent compared with EUR.

“For the moment the decline is not significant in the foreign currency market volatility. Basically, banks buy foreign currency to strengthen their position of their assets in foreign currency, anticipating some legislation initiatives. It’s the banking sector reaction, we’ll see if it will last or not,” said Voinea.

He concluded that Romania has become more resistant to shocks and that the banking deposits are in growth and the loans in RON have a higher share in the total loans.