Romanians react to weaker RON by moving their savings in hard currencies

Romanians have reacted to the RON depreciation by moving savings from RON accounts into hard currency accounts in January, but continue to borrow money in the local currency, according to fresh central bank data.

Bank loans in RON granted to individuals rose by 0.3 percent month-on-month and by 18.9 percent year-on-year in January, up to a fresh all-time high of RON 95.9 billion (EUR 20.2 billion) despite higher interest rates.

But companies reduced their borrowings in January as the RON corporate credit granted by the local banks declined by 1.4 percent month-on-month to RON 69 billion.

Bank loans granted to individuals and corporate clients in Romania rose by 8.4 percent year-on-year in January, to RON 252.2 billion (EUR 53.1 billion), while the amount of deposits increased by 9.5 percent, to RON 331.4 billion (EUR 69.8 billion).

During the same period (January 2018-January 2019), forex-denominated loans rose by 0.9 percent, to RON 87.3 billion-forex equivalent, but the decline is mostly due to the steep depreciation of the Romanian currency in January – by close to 2 percent.

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Bank deposits in RON have become less attractive this year as a consequence of low interest rates and currency depreciation.

RON-denominated deposits of residents (individual clients and companies) declined by 0.6 percent month-on-month to RON 219 billion and the annual growth rate slowed to 6.2 percent, from 6.8 percent in December – or 8.5 percent in July, central bank data show.

Forex-denominated deposits rose by 2.8 percent month-on-month – more than EUR appreciation rate against the RON – in January to RON 112.4 billion-forex equivalent, and by 16.7 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.

In January, bank deposits exceeded loans by 31 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.