BRD's chief: I see more doubts than certainties

The year 2008 will be dominated by uncertainties, with foreign markets being a major source of concern, which could generate shocks on an already vulnerable domestic market, leading to a greater caution from business people, Patrick Gelin, BRD-SocGen’s chairman believes.
“I see more doubts than certainties in 2008. We build our budget optimistic about the performance of Romania, yet the investment programme will depend on how circumstances change: if we see significant worsening, then we are prepared to slow it down,” Gelin told ZF.
He adds that BRD will not engage in a market share policy, as the goal of the second largest bank on the market in terms of assets is to progress “while correctly assessing the risks”.
The behaviour of the international markets is the first major uncertainty as far as Gelin is concerned.
“No one can predict what will happen next. The only impact on the domestic market, for the time being, was the one percent increase in the spread for financing from abroad, which suggests Romania has also been contaminated. At present, the effects are limited, but I don’t know what other outcomes will occur.”
As for Romania’s economic situation, Gelin believes the main uncertainties have to do with the inflation trend and the foreign deficit, which have a tendency to become major risk factors given the turmoil on international markets.
In a worst case scenario, BRD’s top man takes into account the strong depreciation of the RON as a result of contamination from a potential crisis on the foreign financial markets. “With 50% of the banking assets held in euros, a brutal depreciation of the RON may have consequences on customers’ repayment capability.”
A significant aspect that will affect market progress will be the importance analysts attach to risks that threaten the macroeconomic balance.
“We found that less optimistic studies have emerged lately, which offer a short-term outlook. Maybe their authors are wrong, but it is clear that developments abroad urge caution, and analysts’ worsening outlook may translate into a downgrade of Romania’s sovereign rating. It remains to be seen what happens in this department.”
Another doubt concerns Romania’s capability to use EU funds.
“That large amounts of money were not drawn in 2007 is not of great concern, because this is what happened in all countries in their first year after accession.
The problem here is to have projects in the second year that would receive funds and therefore help restore equilibrium to the foreign balance, considering infrastructure investments are a factor that can speed up economic growth and national modernisation. Unfortunately, I don’t know to what extent we will see such projects capable of absorbing the funds allocated.”
Gelin believes that the certainty about potential growth in Romania on the medium term “is total” yet on short term, if the conditions on foreign markets deteriorate, business people will become increasingly cautious.