Romanian monetary aggregates

Every month the Romanian market is looking forward to the release of the monetary aggregates. The hope is that credit will pick and so will the economy. Recent data shows some pick up in credit especially for corporations. The bad news is that most of the new credit is very short term, below one year, which means that its destination is rather to cover cash -flow shortfalls and to finance business investment.

Here is the data.

The M1 vs M3 shows that while NBR keeps RON M1 money supply still tight the M3 has started to grow. Obviously the M3 growth is the result of more credit but looking at M1 the new credit is mostly denominated in EUR.

Looking now at the credit we see that most of the increase comes from the corporate sector. Note that in 2008 the household credit market surpassed the corporate credit one and it kept this position until 2010. .

Taking the analysis further we observe how grim is the outlook for the household credit market. Since 2008 the actual stock of RON credit has been decreasing constantly and it does not seem that the end of this trend is near. There is some activity on the EUR side but not enough to make up for the lost part in RON.  Such a picture does not look promising for domestic consumption in 2012. Without higher wages or lower taxes domestic consumption will not pick up this year.

The picture does look a little better for corporations although the new credit is in EUR and most of it matures in less than one year. This shows that any expectations of corporations expanding their businesses will be pushed forward to hopefully 2013.

Finally, one interesting deveopment in teh public admninistraton side. WE observe a pick up in credit for local admnistrations. I hope this is not connected in any way with the election year.



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