The major systemic risk has to do with the strain on Romania's macroeconomic balance, and the solution is to gradually reduce the budget deficit towards achieving the Medium-Term Objective (MTO), as well as speeding up structural reforms, governor of Romania's National Bank (BNR) Mugur Isarescu on Wednesday told the conference on the presentation of the Financial Stability Report.
"The major systemic risk is related to the strain on Romania's macroeconomic balance. It's true that after the recent financial crisis, and especially after 2013, Romania's economy has witnessed a sustained economic growth. Thus, the average economic growth rate in the past five years is around 4.6 pct. For reference, let me mention that the EU average growth rates in the same period stood around 2.1 percent. Yet this impressive growth pace of the Romanian economy that contributed to narrowing the gap to the EU average was accompanied by a substantial rise in consumption, at the expense of investments, public investments in particular," Isarescu said.
The BNR governor argued that the poor correlation between the increase in consumption and implicitly in aggregate domestic demand with the potential of the national economy - which heavily depends on investments - resulted in an ill-fated correlation with a high dynamics of imports, with negative effects on the foreign balance, as imports permanently outpaced exports by far. Isarescu also mentioned that exports did not perform poorly, but there is an "overperformance of imports".
According to the central bank governor, the most important economic and financial challenge Romania faces in the coming period is the foreign deficit and the current account deficit, the more so as Romania is a regional exception as regards the evolution of the current account in recent years.
Isarescu also said that the Report attempts to suggest how the imbalance issue could be solved, launching also an invitation to debate. Thus, in BNR's view, the sustainable rebalancing of the external situation should rely on two essential components. The first - of a fiscal nature, is to gradually reduce the budget deficit towards the Medium-Term Objective; the second is speeding up structural reforms so as to increase the amount of production factors.