Romanians increase borrowing in RON but move their savings in hard currencies

Romanians have increased borrowing in local currency this year but have steadily moved their savings into hard currency accounts, a trend that could be associated with lower confidence in the RON following the steep depreciation registered in January.

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.

However, there are still few available options for keeping savings in Romania, experts warn.

According to fresh central bank report, RON-denominated deposits of residents (individual clients and companies) rose by 0.2 percent month-on-month in July to RON 220.4 billion and the annual growth rate stood at 6.8 percent – the same rate registered in December 2018.

Forex-denominated deposits rose by 0.4 percent month-on-month in July to RON 114.4 billion-forex equivalent, and by 13 percent year-on-year.

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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.

In July, bank deposits of households and businesses totaled RON 337.8 billion and exceeded loans by 28.6 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 1.8 percent month-on-month and by 14 percent year-on-year in July, up to a fresh all-time high of RON 103 billion despite higher interest rates.

Companies also increased their borrowings in July as the RON corporate credit granted by local banks rose by 0.4 percent month-on-month to RON 71.9 billion.

Bank loans – in RON and foreign currencies – granted to individuals and corporate clients in Romania rose by 1.2 percent month-on-month and by 7.9 percent year-on-year in July, to RON 262.6 billion.

During the last 12 months (July 2018-July 2019), forex-denominated loans rose by 4.1 percent, to RON 87.7 billion-forex equivalent.