DUE TO THE REAL NEGATIVE INTEREST RATES ON DEPOSITS Isărescu: "People may start putting their savings in risky investments"

The low interest rates paid on deposits could cause people to invest their savings in highly risky alternative investments, such as real estate, Mugur Isărescu, the governor of the Central Bank warns.

He says that it has been proven all over the world that investing in real estate is very prone to speculation: "The equation is simple: people who save money they want to get at least a small interest, but which is actually higher than inflation. What they are seeing now instead is that they are being penalized, with real-negative interest. Where can they go with their savings? They are going to place it into something that makes them feel like it is going to appreciate over time. But assets only grow up to a point. What is the peak in every speculation? It's just like in the story with the emperor's clothes...until someone yells out: < the emperor is naked >. After that, the perception changes".

Mugur Isărescu brought up the speculative investments made on the real estate market before the crisis: "Let's remember, it's been less than ten years since that time, when Romanians were saying, in 2006-2007-2008: < We have direct foreign investments of 15-19 billion Euros, the risk is low >, because for the most part, the current account deficit was offset by these investments. The foreign banks would also bring in additional capital and that explains the paradox that we've had until 2008: we had growing international reserves, the current account deficit had reached 14% of the GDP, and foreign investments were at 16%-17% of the GDP, supplemented by bank financing, like I was saying. Reserves were growing, the economy was booming so much it was on the verge of bursting and the exchange rate was gaining. We've all lived this illusion of capital inflows. And they were all true. But, looking now at the statistical data, what was the problem with it? Those foreign investments also included land purchases (...), which proved to be highly speculative. Some did indeed come in to buy land and make some agricultural plantations, but they were few".

In this context, the governor of the NBR emphasized the importance of reviewing in detail the statistical data, in order to avoid the situation that occurred during the real estate boom, when speculative investments in the sector were being presented as direct foreign investments. Accurate and detailed data is essential for executing efficient economic policies and for making sound investment decisions, Mugur Isarescu said.

• The National Statistics Institute and the NBR will present differing sets of data on international trade

The National Statistics Institute (INS) and the National Bank of Romania will present different data on international trade, after the NBR will implement the new European statistics methodologies, the representatives of the two institutions have announced.

This year, two new statistics standards will be implemented - the sixth edition of the manual concerning the Balance of Payments, which is in the process of implementation on a European level, and the ESA 2010 standards.

The current version used in statistics dates back to 1993, while the new manual was drawn up in 2009 and will be implemented starting this year.

Constantin Chirca, director at the NBR, told us: "Please do not treat it as a mistake when you start comparing the value of the exports presented in the communiqué of the National Statistics Institute, which will not be switching to the new methodologies, to the value of the exports that we will be announcing. The difference will go to the services section. The new methodology treats goods that exit the country differently than those that only come in for processing without exchanging their owner. I will give you an example: in outsourcing activities, a clothing maker buys tissue from Italy, and its value is added to imports. It makes suits, that end up to the same owner, (the one who sent in the cloth), and its full value will be added to exports, by the INS. From now on, we will no longer be recording the cloth in exports or in imports, instead, we will only log the cost of labor under services. That is why, the exports value calculated by the NBR will be smaller than the one calculated by the INS".

All EU countries will be required to implement the new methodologies for statistical calculations, starting in Q4 this year, according to Mr. Chirca. The NBR will apply the new manual for calculating the balance of payments for the entire year 2014, and will publish its statistics starting in September, according to the tentative schedule of the Central Bank.