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Wednesday, May 7, 2008

Romania Household Forex Borrowing March 2008

According to data from the Romanian central bank, household borrowing in euros continued to rise in March.

Total credit (including the coporate sector) was up by 66.3% year on year. Household borrowing in RON was up by 43% while household forex borrowing (mainly euros) was up a massive 140.3%. This latter number, large as it seems, was actually down slighly y-o-y from the 142.3 % registered in February and the peak 143.4% in January. The monthly rate of increase - 3.4% - was the lowest in at least a year, and again is well down from the 14.2% m-o-m peak hit in August 2007.

So in fact this may all now be slowing slightly, and it is not clear why, since of course euro denominated loans are not affected by the interest rate changes in the Romanian central bank. Perhaps the general expansion is losing momentum, but we need to wait and see some clearer signs in the real economy data before reaching this kind of conclusion. Certainly there may be some sort of tightening in credit conditions going on after all the IMF and other warnings. The real question is what is going to happen about the current account deficit once the borrowing which is attracting the funds to plug the whole really slows down.

In a not entirely unrelated piece of news the Romanian Statistics Office announced today that the construction production index rose in March at an annual rate of 32.9%.

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