Exchange rate stability more convincing than NBR interest rate cut

Foreign currency non-government lending reached its eleventh consecutive month of growth in May, while the volume of existing loans climbed by the equivalent of two billion euros, to 29.9 billion euros, while RON loans are on an almost uninterrupted decline, according to data from the NBR (National Bank of Romania).
Despite repeated calls from the National Bank both to the population, and to companies, to borrow in RON, the exchange rate stability (maintained in part through the efforts of the central bank) and the visibly lower interests have directed funding demand almost exclusively to euro funding.
The volume of RON non-government lending fell to 78 billion RON (equivalent to 18.7 billion euros) at the end of May, down by 3.8 billion RON, i.e. 4.7% against May last year.
“The population trusted the RON’s stability and prospects of a slight appreciation. People probably bet on small gains based on the RON’s slight, gradual appreciation. In the case of companies, I think we are talking about euro-denominated incomes, which cover and thus justify borrowing in the same currency in order to eliminate the exchange rate risk,” comments Florian Libocor, chief economist of BRD-SocGen.