Romanian lending slows in July

The rhythm with which Romanians borrowed from banks in July dropped drastically to 0.3 percent, the lowest rate month-on-month for the past 18 months. The value of foreign currency denominated loans contracted was 1.5 percent lower than in June, although foreign currency loans are still twice as high as lei-denominated loans annually, according to data made available by the National Bank of Romania (BNR). Similarly, bank deposits registered the highest drop in the past eight months.

The increase in costs for loans led to the most significant annual slowing of non-governmental loans in July for the past ten months, of 55.8 percent, to RON 178.69 billion (€50 million).

The application of lending restrictions for the population, and increased costs for loans, as well as other obstacles imposed, could lead to a rise in non-governmental loans in 2008 of a mere 40 percent, below advances registered in past years, say bankers.

"The July slowing is on foreign currency denominated loans. Lending would have slowed even if restrictions had not been imposed by BNR, because it would be difficult to maintain the rhythm of growth registered last year, when lending conditions were more relaxed for the population. We believe that the non-governmental lending advance will be 40 percent this year," according to a statement for Business Standard by Ionut Dumitru, head of the Macroeconomic Research Department of Raiffeisen Bank. However, bankers are expecting a considerable advance in loans this year until such time as the new regulations go into effect.

Business Standard