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National Bank of Romania: The financial stability of the country is solid

By Edwig Ban
The Governor of the National Bank of Romania (BNR), Mugur Isarescu presented today to the Bucharest press the Central Bank's Annual Report 2017.
The BNR is an independent institution, operating under a specific law, not being subordinate to any political body. The BNR reports are of particular importance for the analyzes carried out on the Romanian economy, both internally and by specialized foreign institutions.
The main features of the macroeconomic and financial context underlined by Mugur Isarescu are:> economic growth in 2017 was at the peak of the post-crisis period in the context of two consecutive years of fiscal stimulus and revenue growth; > an external imbalance in accentuation, amid the expansion of domestic absorption beyond the potential of the economy; > the upward trajectory of the annual inflation rate, from the negative values recorded in 2015 and 2016 at values close to the upper bound of the target range; > continue the normalization process of the monetary policy operational framework; > gradual adjustment of monetary policy conduct by narrowing the interest rate corridor to permanent facilities; > robust country financial stability, with no severe systemic risk identified; > the strong financial position of the BNR; > significant positive equity level and positive financial result.
The country's financial stability is robust and not threatened by severe systemic risks, but an increase in external imbalances may take aggravating forms, especially as a result of unsustainable discussions (of non-specialized people in the economy and banks) in the public space, according to the Governor of the Bank National Bank of Romania (BNR).
"The current account deficit is below the 4% threshold, therefore below the alert threshold, but the recent growth trend is too strong not to be signaled," Mugur Isarescu said on Friday at the BNR Report on year 2017.
The NBR governor warned, however, that "negative factors can be trained very quickly," and from "an austere discussion" in the public sphere could be the mistrust of investors who finance Romania's deficits.
"We have no problems financing the current account deficit, the situation is stable, but investors can scare. (...) About 20 billion euros are in the hands of non-residents and two-three news can make them change their minds, and the process can take aggravating forms, "Mugur Isarescu said.
Mugur Isarescu reminded that the external debt is low in relation to GDP, "but that does not mean we encourage the debt to rise. A serious, balanced discussion is needed, "especially since the ratio to GDP has declined and its value has risen.
"In the context of two years of fiscal stimuli, 2016 and 2017, external imbalances have increased, but the limits of prudence have not yet been exceeded (...) The current account deficit is below the 4% threshold, below the threshold of caution, but the recent growth trend is too strong not to be signaled, "Mugur Isarescu said at the presentation of the BNR Report for 2017.
"The balance of goods deteriorates on all components, which means more attention to how we stimulate consumption," Mugur Isarescu said. The head of the central bank recalled that consumption-based economic growth is above the potential of the economy, de-starter and the expansion of external imbalances.
The foreign imbalances have increased on the background of tax incentives that have encouraged consumption, but the prudence threshold has not yet been reached, but the strong growth trend is worrying, BNR Governor Mugur Isarescu said on Friday.
The BNR report shows that in 2017 the central bank obtained a profit of 186 million lei, "80% of which went to the state budget," said Mugur Isărescu, pointing out that the profit was obtained "mainly by management of the international reserve ".
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