A deeper decline of the RON/euro rate should not be ruled out, as such movements can still occur, not only because of internal policies, but also as a result of regional or broader influences, says Dominic Bruynseels, executive chairman of BCR, the largest bank in Romania. Consequently, he pleads for RON-denominated loans, for which interest rates are falling, except for long-term mortgages.
At the same time, he says the stabilisation of the exchange rate in recent months has tempered the piling up of bad loans on the mortgage segment, with customers getting used to the new levels of their instalments. The BCR forecast points to a 4.30 RON/euro rate in late 2009, from 4.21-4.23 RON/euro at present.
Bruynseels, at the helm of BCR for one year, states the second half will be "undoubtedly tougher". "Conditions in the business environment will slightly improve owing to interest rate cuts that will bring some respite, but fundamentals will not improve".
In his opinion, the new forecast anticipating an 8% economic contraction this year does not come as a major surprise for any businessperson who has witnessed the rapid decline of demand in recent months. "The problem is people are simply overwhelmed by such figures instead of taking the time to think what should be done for the economy to go back into positive territory".
He does not expect loan demand to rebound in the next six months, except for the effects of the "First House" programme" on the retail segment.
Bruynseels says that in Q2 BCR’s bad loans had different evolutions depending on the client segment. The bank’s official mentions causes such as rising unemployment, the elimination of bonuses and even salary cuts in many companies.
"The unemployment rate is expected to rise further, also in the public sector if we take into account the latest signals, which is worrying for us. I
