Lazea (BNR): Loans in Romania are limited by population’s extreme poverty

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Loans in Romania are limited by the extreme poverty of the borrowers, who will not be able to own larger financial assets without the overall and massive improvement of the education system, Romanian National Bank (BNR) chief economist Valentin Lazea told a financial conference, on Tuesday.

He explained that the low financial assets of the population are due to the small incomes, which in their turn are the result of the low productivity, caused in its turn by the poor education system.
The BNR official referred to a survey Unicredit Group was conducting starting on Jan. 20 about the household wealth in the Central and Eastern European countries, where Romania ranks among the last ones compared to the countries in the area.

Lazea says that the Romanians’ extreme poverty makes savings to be very small and explains why banks show reticence about granting new credits. According to the survey, for a GDP comparable in nominal terms to that of Croatia or Hungary (Romania – 125.2 billion euros, the Czech Republic – 137.7 billion euros and Hungary – 100 billion euros) the financial assets of the Romanian population (bank deposits, investments in the pension funds, mutual funds, investments in the stock exchange) are two-three times smaller.

In Romania, the financial assets gross 33.3 billion euros, while in Hungary they amount to 65.4 billion euros, and to 93.5 billion euros in the Czech Republic. Romania lags far behind the Czech Republic and Hungary also in terms of the GDP proportion of the population’s financial assets, namely 26.6 percent compared to 67.9 and 65.5 percent respectively. Romania ranks the last but one in the region, before Russia with 21.2 percent. The financial assets of Bulgaria’s population account for 46.4 percent of the GDP.

The central bank chief economist also said that the financial assets of Romania’s population, besides the fact they are few, tend to be equaled by the financial liabilities (credits), which means that the population seems to have reached the debt limit and the banks should be understood when they are reticent to give new loans.
According to the survey, the financial liabilities of Romania’s population total 27.4 billion euros and stand for 82.3 percent of the financial assets, whilst in the Czech Republic and in Hungary the percentage is much smaller, namely 41 and 54.6 percent respectively.

‘In Romania, there are objective constraints on crediting the population along with social restrictions. Romania’s population fails owning enough financial assets to make use of when under financial stress circumstances. This explains why the unemployment is less accepted in Romania than in other countries – each day without a job being a disaster, and why pensioners are permanently discontent,’ Lazea concluded.

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