Erste Bank: Salaries increase must be backed by productivity

The Euro/RON exchange rate will be of approximately 3.4 RON at the end of the current year, meaning that the appreciation of the RON will stagnate due to a high current account deficit, said Rainer Singer, Erste Bank’s analyst on macroeconomic issues.

“We forecast a slight reduction of the current account deficit, determined by the improvement of exports, sustained by the foreign investments in the last years. In spite of all these, the fats appreciation from the last weeks is not sustainable, and the trend will not continue,” said Singer.

Erste estimates that Romania will have at the end of the current year a current account deficit of 9.2 percent of the Gross Domestic Product (GDP), backed by a 6.5 percent economic increase.

Singer believes that the state bonds issues could influence the exchange rate, and depending on the volume of the bonds issued and the investor’s interest.

At the same time, the Erste analyst expects for the Romanian National Bank (BNR) to maintain the same interest rate, at least by the end of the year’s first semester.

Singer considers that an approach of the salaries paid in Romania to the ones paid in the other EU countries must be accompanied by an increase of the productivity.

“The increase of the salaries in Romania must be similar with the productivity in order to avoid any problems, if an alignment to the salaries existing in the other EU countries is desired,” said Singer.

Together with the Romanian Commercial Bank (BCR), Erste Bank is the main sponsor of the financial-banking conference that starts in Vienna this week and which will be attended by the representatives of the main banks from the Eastern and Central Europe region.

No important players on the capital market

Henning Esskuchen, Erste’s chief on the capital market investments department, said that the Romanian capital market should grow in the following period but the stock exchange’s reduced liquidity will not attract new important players.

“Although through Romania’s EU accession were eliminated some restrictions regarding the investments made by several investment funds, the size of the market does not allow the entrance of new significant investors so I don’t see any money inflows in the Bucharest stock exchange,” said Esskuchen.

The economic analyst said that the Romanian capital market is not cheap comparing with the markets of other emerging countries, but this is justified especially by the fact that Romanian has entered EU.

“Because the premises are good, a massive correction of the capital market has no sense. Sooner or later you have to go back on that market and many learned how to mark profits and come back soon on new positions, a thing that eliminates the risk for any accentuated decreases of the capital market,” said Esskuchen.

The analyst also referred at Romania’s real estate market, saying that general prices in the sector will decrease on medium term.

Esskuchen believes that Romania will follow the model of the other countries in the region, where the increase of prices was followed by a similar decrease, due to the expansion of the offer and the development of this sector.

“The significant and rapid price increase from the real estate market is common to all the countries from this region but it is not an ever ending story. This is a phenomenon that can be seen in many of the Central Europe countries,” said Esskuchen.

The official believes that the offers in this sector will diversify and more foreign developers will enter on the Romanian real estate market and this will put a strong pressure on the prices in the next two-three years.

Nine O'Clock