The Romanian Investor Relations Association (ARIR) organized the fourth edition of the monthly event “Market sentiment – August”. The first conclusions of the representatives of the National Bank of Romania, CFA Society Romania and OTP Asset Management are that the fiscal policy will be decisive for the economy, we have historical deficits but the European recovery plan is an extremely rare opportunity for the development of Romania. Experts see higher volatility internationally as markets have risen sharply and uncertainty remains the key word, the recovery perspective depending on the trajectory of the pandemic.
Cristian Popa, CFA, Member of the Board, NBR:
„The decisions of the National Bank of Romania (NBR) are already felt by the Romanians in the lower loan rates. With regards to the monetary policy, we need to look in greater detail so that our decisions will encourage lending without discouraging savings.
We expect the inflation to be in the target assumed by NBR. Another important aspect must be considered as well – the real interest rates are already negative: the nominal interest rates are lower than the inflation rate. Similar to the fiscal policy, real monetary conditions are and remain stimulating, precisely because of the negative real interest rates. Of course, we want to reduce costs for the real economy and the NBR has already operated 3 interest rate cuts in this regard, but they must also come from margins. In terms of deficits, we have the largest ones in the region and the financing organisms know this. We could have less harsh corrections if we will use the European funds made available, but history tells us that we need to be better at absorbing them. ”
Daniela Șerban, ARIR President & Co-founder:
„We are in a challenging situation and it is essential for the state to use all available resources to counteract market volatility and support the economic recovery. Pension reform and a fiscal policy to stabilize the budget deficit can save us from country rating downgrade which would mean that some investors will no longer be able to invest in Romanian sovereign debt.”
Dragoș Manolescu, CFA, Deputy CEO, OTP Asset Management:
„What will happen on the political scene will greatly influence the Romanian economy and the chances of recovery. There are 2 scenarios that must be considered: the motion will go through and this means an increase in pensions by 40% and the scenario in which we will not have motion and we will have local and parliamentary elections. The increase in pensions is not sustainable and will lead to a reduction in the country’s rating from S&P side, which will put pressure on Romania’s bond prices.
We also have a great opportunity with the money coming from the EU – the 79+ billion euros – a chance for Romania if we take into account the high unemployment (which provides labor) and the possibilities to invest in large projects infrastructure such as highways, hospitals, education, digitization. Considering the geostrategic war between USA and China, major investments can help Romania attract other private investments (declining imports from China, integrating production and supply chains).”
Adrian Codirlașu, CFA, President CFA Society Romania:
„Before elections, there is more volatility in the markets. And, also in the case of Romania, the elections have complicated the adoption of measures to alleviate the health crisis. The deficit this year is in line with that of other EU countries, but it will matter a lot how we will be next year, if measures are taken to reduce it. At the same time, it must be borne in mind that the medical crisis must first be resolved, and then stronger measures can be taken to revive the economy. Without resolving the medical crisis, confidence in the economy will not return. The pandemic has permanently changed certain behaviors: consumption and remote working. The move to online has had an impact for the representative companies from this sector that are reaching historic highs. As, through distance work, the location of employees becomes irrelevant, there are opportunities that can alleviate the imbalance between cities. This distance work is also much more environmentally friendly.”