IMF: Romania ’09 Pvt Lending Annual Growth Revised To -1.7% From +16%

IMF projected more optimistic levels for the next couple of years, as it sees Romanian private lending growing at an annual rate of 5.6% in 2010 and 13.2% in 2011.

Romanian private lending grew at sizeable annual rates over the past years, the IMF said in its report after the first review on Romania's progress related to a EUR13 billion loan it secured earlier this year.

In 2006, private lending rose 54.5% on the year, with the figures reaching 60.4% in 2007 and a more modest 33.7% in 2008.

According to the IMF, financial stress in the Romanian banking system eased significantly with the international support package and recovering global financial markets, but credit conditions remain tight.

Since the announcement of the international financial package, Romania's leu remained "broadly" stable, allowing the central bank to focus on injecting cash into the banking system rather than intervening to support the currency, IMF noted. As a result, bank funding costs decreased and interbank rates were brought down to the key rate level, it said.

"Lending conditions remain tight, however, due to stricter lending standards, worsening asset quality and lower demand, and real credit growth decelerated sharply from 25% year-on-year at end-2008 to 5% by mid-2009," IMF said.

The IMF believes Romania's central bank will continue to adapt its monetary policy stance as "inflation and conditions in the foreign exchange market permit," but recommended precaution given inflation levels are well above the EU average and the economy "is vulnerable to significant further depreciation pressures due to large unhedged foreign currency debt of the nonfinancial sector, especially households."

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