Loading ...A decision to raise the interest rates to loans, made on the backdrop of the global crisis, may bring about bankruptcies in the over-indebted sectors of the economy, such as construction and retail trade, the Bursa daily quotes chairman of the Applied Economics Group, Liviu Voinea as saying on October 14.
The economic expert explained that the Romanian economy relies on debt-based consumption and such consumption should be curbed; the effects of the curbed consumption are already manifest, namely the industrial production slowed down in August, he added.
The effects of the current financial crisis pose a medium-term challenge both to the private sectors and to households, with the two sectors to be the next victims after the banking sector.
The first effects of the crisis are being felt, for the moment, in the level of the interest rates to loans, particularly to mortgage lending, since the banks have begun to raise them as a result of more expensive financing and of the restrictive money policy. The next step is the transfer of such costs to the real economy of the country, the economists argue.
Alpha Bank chief economist Ella Kallai said that the restriction set to the extension of loans will prompt the population to save money, which will lead to curbed consumption and, consequently, to reduced demand for the domestic and foreign products and for real estate.
Kallai added that some companies might react to such diminished domestic demand by redirecting their output to the foreign markets, notably to the regions less affected by the crisis; therefore, we might witness a rise in exports, Kallai said.
On the other hand, the investments relying on funding from borrowing will drop and will bring about a diminished need for imports, she explained. Romania will thus gain, on the short-term, a faster re-balancing of the current account, the Alpha Bank official stressed.
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