Drăgulin: The NBR can not lower its policy rate at its own discretion, due to the macroeconomic context

The National Bank will continue to lower the policy rate, but can not do so at its own pace, yesterday Ioan Drăgulin said, at a FinMedia seminar, Ioan Drăgulin, head of the Financial Stability Department. He explained: "The steps to lower the interest rate, which would lead to cheaper loans, will not occur as quickly as the real estate market would like. There is still room to maneuver, but for now the NBR and the commercial banks have no valid reasons to accelerate cheapening loans. Without serious macroeconomic adjustment, that would lead to an inflation within normal limits, to stabilize and bring confidence to the currency market, there can be no discussion concerning the ability of the banking system to lower the interest rate. This climate, together with foreign factors, cause the slowness of this process".

Mr. Drăgulin stressed the importance of steps that the government should take urgently in order to provide true help for the economy during the crisis. Without this kind of aid, the entire real estate market will suffer because of the lack of confidence and low demand for home mortgages.

Concerning the interest rates on the interbank market, which rose above the policy rate during these past few weeks, Drăgulin considers that persistence of these fluctuations could become problematic.

However the NBR official continued: "Interest rates on the interbank market serve as signs that there is still vulnerability. What"s more under the current circumstances, we may see fluctuations of the exchange rate. The National Bank will avoid excessive intervention on the forex market in order to allow the monetary policy to remain credible with a view of joining the Euro zone".

In turn, Emanuel Odobescu, deputy general manager of Piraeus Bank, concurred with the statements of the NBR official and he added: "if we didn"t have a stable economic framework, with real steps taken to aid the economy and ensure political stability, then there is no way to reduce distrust in the real estate market and there won"t be any applications for loans. From my point of view, we have far too few new homes. Out of those that have been completed, not even 20% are occupied by buyers. The rest are vacant and have not been sold, due to lack of confidence. These last few years, over 70% of real estate deals were speculative".

Daniel Fuchs, general manager of "Spiegelfeld International", claims that the political instability is hurting the real estate market and the Romanian economy in general: "Investors have better opportunities in Western Europe. It is not normal to invest in such mature real estate markets. The real demand is in Eastern Europe, in particular in Romania, but the Government isn"t doing anything to help with the economic recovery. Properties are still expensive, even though the crisis brought prices down in many areas".

Daniel Fuchs, said political stability matters for investors, as do efforts to help the economy recover and a favorable tax environment, that doesn"t change from one government to the next.