Dumitru, Raiffeisen: We Need Policies To Boost Domestic Saving. Growth Potential Reaches RON18B

12.17.2011 By Razvan Voican , Claudia Medrega

Romania needs public policies that would enhance domestic saving if it wants to benefit from additional liquidity estimated at around 17 to 18 billion lei (approximately EUR4 billion), said Ionut Dumitru, chief economist with Raiffeisen Bank Romania.

Household bank deposits in lei rose by 13% on the year to roughly RON70 billion at the end of October, according to central bank data. Corporate deposits grew at an annualized rate of 14.3%, the data showed. On the other hand, corporate deposits in foreign currency dropped 10.8% on the year, but household deposits increased by 3%.

"We need public policies to increase domestic saving to a level that can sustain investment financing so the country's dependency on foreign capital inflows will be lower," Dumitru said.

He added the private sector indebtedness can only grow so much before it becomes unsustainable, while the economic growth model based on indebtedness, which Romania has used in the past years, comes with string attached.

The Raiffeisen Bank official said the ratio between household loans and deposits has improved lately, after the banks raised interest rates in a bid to attract new clients

Spooked by the ever-increasing possibility that the European crisis will prompt parent banks to reduce financing to their subsidiaries, Romanian lenders turned their focus on deposits and are offering annual yields of over 7% for new deposits in lei and of over 4% for hard currency deposits. For example, Alpha Bank is paying an interest rate of 5% a year for one-year deposits in euros, while Banca Romaneasca and Piraeus Bank are offering 4.9% and 4.8% a year for deposits of seven and five months, respectively.

The mentioned banks have been trying to reduce their financial dependency on their Greek mother-banks for the past two years. However, they are not alone in the fight to cut back on external financing and most of their competitors have also raised interest rates to gain more clients.

(English version by Florentina Dragu)