Those of you still watching the economic news in Romania these festive days, might have had a look at the monetary indicators released by NBR today. At least you might have heard that lending has been jump-started in November. Let’s have a closer look at the data.
The first graph I want you to see is the one showing M1 – narrow money supply and the one controlled by monetary policy – against M3. Odd isn’t it? M1 has had a drop in 2008 and never recovered since then. Yet financial sector extended credit. To whom and in which currency?
From the next graph one can see that the government and the corporate sector were the two beneficiaries of credit growth in since 2009. To be more precise government was responsible for 2009 and 2010 and the corporate sector for 2011. It is also obvious that the household sector is still struggling and almost no lending went that way. Also, if the next t couple of years will be as bad for the household sector government credit will be as large in nominal terms as household credit.
Finally here is the picture showing that the corporate sector still prefers to borrow in foreign currencies. Theoretically it could mean that it either makes extensive use of hedging instruments or that it does not believe in a weaker RON in future. For the health of the corporate sector I hope is more the case of the former than the latter.