SIMILAR ARTICLES

Three problems in 2018 budget – perseverare diabolicum

The first time it happens, the second time it can be a coincidence but for the third time it is already confirmed the establishment of… Mai mult

Draft / Employers who do not pay employees’ contributions to state budget are at risk of up to 6 years of imprisonment

The intentional non-payment of taxes and contributions due to the budget, subject to the withholding regime, will be considered a tax evasion, according to a… Mai mult

Fiscal Council, on 2018 draft budget: Deficit target depends on exceptional revenues. Overvalued revenues, undervalued expenses

The Fiscal Council published a preliminary opinion on the 2018 draft state budget on Wednesday, stating that this draft remains within the already traditional pro-cyclical… Mai mult

Real convergence – Wage purchasing power: Some comparisons with former communist countries

BNR made a thorough analysis of Romania’s status in terms of real convergence with Western economies. A precondition for adopting the euro, in line with… Mai mult

Eurozone accession in mid-term – single objective that can limit slippages in economy

Keeping the national currency under a controlled float exchange is a way to optimize the sustainable economic growth towards getting closer to the West but… Mai mult

ROBOR: Fastest growth in the last three years. Banks have adjusted their expectations and, suddenly, rhythm of market transactions

de Adrian N Ionescu 2.10.2017

 

Interest rates on the interbank market (ROBOR) recorded this week the fastest growth in the past three years after banks’ expectations have led to a decline in liquidity on the market.

However, the temporary drop in liquidity on the money market has fundamental causes, and even if sudden market movements are usually corrected by further developments, they will stabilize at higher levels, observing a trend identified by Cursdeguvernare.ro even since this spring.

Banks’ expectations anticipate, on the one hand, that the National Bank of Romania (BNR) will tighten its monetary policy after revising upwards the inflation forecast, which supports the expectations regarding the BNR’s decisions.

On the other hand, the demand for lei in the market also comes from both the demand for loans and the Government’s financing need, amid the macroeconomic imbalances.

At the same time, the foreign exchange market seems blocked at a rate of less than RON 4.60/euro, a level that would discourage the sales of currency, according to market sources.

The National Bank has confirmed on Thursday that the interest rate trend was driven by the change in the market liquidity, which was severe enough to lead to an accelerated ROBOR increase. BNR says that the increase of the interest rate was something to be expected, although – of course, not in the current pace.

“The ROBOR evolution depends on the level of liquidity in the banking market. We are in a period of resetting this index after we had low interest rates at a historical level over the past period. From this perspective, this growth was expected to start,” stated on Thursday Dan Suciu, the BNR spokesman.

Indeed, the reversal of the interest rate trend has been confirmed since the spring, when the 3-month ROBOR average interbank rate went for the first time above the temporary equilibrium range set between 0.8% and 0.9%, where it has stayed since November last year, after exceeding the minimum historical levels.

Acceleration of interest rates

The 3-month ROBOR (Romanian Interbank Offered Rate) has increased on Thursday by more than 31.5% compared to Monday, to 1.46%/year and by 46% compared to the preceding Monday, when it exceeded the psychological threshold of 1%.

The 3-month ROBOR is now the highest in exactly two years, it is more than double the level registered one year ago and 78% higher than at the beginning of 2017.

The 6-month ROBOR rose to 1.57% a year on Thursday, more than 27.6% above the level registered on Monday and by almost 54% this year, reaching the rate registered almost two years ago (October 15, 2015).

CFA Romania analysts expect the 3-month ROBOR to reach 1.67% on average in a year and inflation to reach 2.55%.

Market expectations

Based on the argument of the increasing inflationary pressures, bank analysts (and not only) expect that BNR will tighten the monetary policy and even increase the monetary policy interest rate from 1.75%/ year to 2-2.25% end of the year.

Banca Transilvania’s macroeconomic scenario says the BNR’s monetary policy rate could increase at least to 2% this year and to 3.5% in 2018.

The acceleration of the domestic economy in the first half of this year seems unsustainable given the intensification of the macroeconomic imbalances and the persistence of a difficult investment environment,” said Andrei Radulescu, Senior economist at BT, in a report issued on Thursday.

At the same time, “in the financial economy domain, the domestic market failed to accompany the positive global climate, amid the signals about a more aggressive state intervention in the economy, as well as the increasing risks to mid-term macro-financial stability,” adds the economist quoted.

“The central bank will increase its monetary policy rate by the end of this year, as well as during the next year, close to the inflation target (2.5%),” said Iancu Guda, President of the Association of Financial and Banking Analysts of Romania (AAFBR).

BNR revised the inflation forecast from 1.6% to 1.9% for the end of this year and from 3.1% to 3.2% for the end of 2018.

“Inflation is increasing, and it is absolutely clear that interest rates will increase, and will be normally above the inflation rate, although they will stay for a time below it, depending on the pace adaptation,” said on Monday Ionut Dumitru, Chief economist of Raiffeisen Bank, for Cursdeguvernare.ro.

Recent interest rate changes are a consequence of the level of liquidity in the market and the transactions with this liquidity,” said also on Monday Florian Libocor, Chief economist of BRD, in a personal capacity.

Economist Aurelian Dochia, in his turn, also considered that “the increase in the interest rates was something to be expected, on the one hand, because inflation is increasing, as well as the demand for loans, the growth of which also pushes upward the interests. On the other hand, let’s not forget that the big central banks are on the trajectory of normalizing the monetary policy (the FED gave clear indications, and the ECB is to follow). ”

For now, it is expected that BNR will raise the interest on the deposit facility offered to the banks in its Tuesday meeting, as Erste Group Research estimated.

The cost of financing the companies, the state and the debt burden of indebted individuals will significantly increase but the growth will be felt at the end of the year, as banks include the ROBOR growth as a quarterly average.

Depending on the type of loan, estimates of the increase in the monthly reimbursement rates start from a few lei per month for the consumer credit of 5,000 euros on five years and reach almost 1,000 lei for a corporate loan of one million euros, at the current ROBOR level.

For now, borrowers who have contracted loans after November 2015 are affected, which the BNR’s spokesman did not hesitate to notice, thus implicitly confirming the trend of increasing the interest rate.

Mergeți în homepage ›

Publicat la data de 2.10.2017

Lăsați un comentariu


NEWS

Brussels offers Romania four months to take measures to correct significant deviation of structural deficit

The European Council issued on Tuesday a new recommendation, at the request of the European Commission, based on the significant deviation procedure, with Romania being… Mai mult

Eurostat: Romania had second lowest tax to GDP ratio within EU, in 2016

In Romania, the ratio between the revenues that must be collected from taxes (including social contributions - tax/GDP ratio) and GDP was 26% in 2016,… Mai mult

9 ambassadors repeat: Venice Commission's opinion is needed to amend laws on judiciary

The nine ambassadors who met on Wednesday with Minister Tudorel Toader shared their "concern over the draft laws on the reform of the judiciary discussed… Mai mult

British Vitruvian Partners bought 30% of Bitdefender

Vitruvian Partners investment fund acquired about 30% of Bitdefender from Axxess Capital and becomes the second largest shareholder in the company, valued at over USD… Mai mult

Split VAT at the Chamber of Deputies: Dilemmas of all kinds. Thresholds for outstanding payments have increased 10 times, Budget Committee to resume debates on Monday

The Budget Committee of the Chamber of Deputies has increased ten times the threshold of the outstanding VAT obligations from which companies will automatically be… Mai mult

Competition Council: Food price increase could be caused by demand excess from budget deficit

The Competition Council started an analysis, following the request of the Ministry of Agriculture, to establish the causes of the accelerated food price increase this… Mai mult

Seizure of all Liviu Dragnea's assets to recover EUR 28 million in Tel Drum case

Liviu Dragnea at the exit of the DNA headquarters where he was expected by a group of supporters and another of protesters. DNA prosecutors have… Mai mult

Rompetrol saga, chapter about money: Government asks KazMunaiGaz to pay the historical debt and demand settlement of case in court

The extension of the memorandum between the Romanian state and KazMunaiGaz, the owner of the Rompetrol Group, will be discussed only after the company's historical… Mai mult

"Not only we have not died, we rank third in the world" - Government approved second budget amendment, deficit of 2.96% of GDP

The second budget amendment this year has been adopted at the government meeting on Wednesday. As the Finance Minister assures, this amendment is "positive", the… Mai mult

Mayors: Government to offset by state budget money municipalities’ losses following tax measures

Mayors accepted on Tuesday in the negotiations with Prime Minister Mihai Tudose and several cabinet members, the promises made by the government officials to partially… Mai mult

Competition Council, "worried" that municipalities are establishing their own companies

The establishment of own companies by local administration to manage the services at the local level is worrying for the competition authority, Bogdan Chiritoiu, President… Mai mult

Draft legislation on judicial system in Parliament – to be debated as a matter of emergency

The ruling coalition registered with the Chamber of Deputies on Tuesday the draft amendments to the three important laws for the judicial system: Law 303/2004… Mai mult

Negative opinion and analysis of Fiscal Council on tax changes. "Tax package" costs 5.2 billion, not planned at all

The Fiscal Council issued a negative opinion on the proposal to amend the Fiscal Code, according to the opinion published Friday on the institution’s website.… Mai mult

Negative opinion from CES for Tax Code changes, Government meeting postponed

The Economic and Social Council, a consultative body of the Parliament and the Romanian Government, issued a negative opinion on Tudose cabinet's draft amendment to… Mai mult

Doing Business 2018: It is easier to do business in Republic of Moldova than in Romania

Romania ranks 45th in the Doing Business 2018 ranking by the World Bank (WB), with a total score of 72.87 points, right under the Republic… Mai mult