Mugur Isarescu: Romania’s risks in context of tensions in Ukraine „appear manageable”

The risks for Romania in the event of economic restrictions within the context of tensions in Ukraine ‘appear manageable’, considering the limited exports to Russia and Ukraine, the low degree of dependence on Russian gas, and the inexistence of direct links between financial systems, the National Bank of Romania (BNR) Governor Mugur Isarescu explained in a presentation at the meeting of the Asian ambassadors, posted on BNR’s website.

‘Trade restrictions or disruptions may affect exports and/or energy supply, yet the risks appear manageable. Exports to Russia and Ukraine account for only 4.7% of total Romanian exports, [thus] a 10% fall in the value of exports to these countries, assuming no replacement, would shave 0.16 pp off the growth rate of Romania’s GDP,’ Isarescu’s presentation shows.

The head of the central bank discussed the economic risks for Romania due to tensions in Ukraine, the banking system, and the expectations for 2014.

As regards the natural gas consumption, the document points out, ‘While virtually all imported natural gas comes from Russia via Ukraine, Romania is able to cover on average around 80 percent of its own consumption from domestic sources (…) Imported natural gas accounted for only 15 percent of total consumption in 2013. (…) Romania ranks the third least imported-energy-dependent country in the EU. (…) Even a total shutdown in gas imports may be weathered without tangible disruptions at least until November-December.’

On the other hand, ‘Russian capital has a significant presence (directly or via holding companies based in other EU countries) in the iron and steel (TMK), metallurgy (ALRO Slatina and ALOR Oradea) and oil refining (Lukoil) sectors, yet none of the Russian-owned companies may be deemed to be of systemic importance.’

There are ‘no direct links between the Romanian banking system and those of Russia and Ukraine, (…) no Russian or Ukrainian capital in the Romanian banking system, (…) negligible exposures of Romanian banks to Russian or Ukrainian entities .’ The only vulnerabilities of the Romanian banking systems are related to ‘potential for spillovers through the common lender channel via the exposure of Austrian and French banks to Russia and Ukraine.’ On the other hand, ‘the comfortable solvency and liquidity buffers  in the Romanian banking system should help alleviate such spillovers in case they materialize,’ the Governor further explained.

‘So far the impact of regional flare-ups on the capital and forex markets has been moderated and short-lived,’ Isarescu mentioned.

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