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President Klaus Iohannis met with NBR Governor Mugur Isărescu today to discuss ways to finance the budget deficit, estimated by the European Commission at 9.2% by 2020 and 11.4% by 2021.
“We have programs, we have solutions to finance the deficit, revive the economy, and we believe that if we do things right, then we have a good opportunity to recover the Romanian economy and get out of the totally unpleasant situation, the crisis situation in which we are. we find now, “said President Iohannis.
Spring forecasts published by the European Commission show that Romania’s GDP will fall by 6% in 2020, after a 4.2% return in 2021. At the same time, unemployment reaches 6.5% and the budget deficit in minus 9, 2% in 2020 and 11.4% in 2021, the highest in the entire European Union.
“We had a long discussion and we managed not only to reach the important issues, but also to find very good solutions. We discussed the economic situation. We focused on two issues: the first is the budget deficit. It is clear that we will have a larger deficit than originally planned. , and this deficit must be financed. (…) What we all want is to have good financing for the deficit, so that there is no need for additional austerity measures, “President Iohannis also said.
How much does Romania cost?
Financing costs in euros for the Romanian state rose sharply from 1.2% to 3.2% for 10-year government bonds, as Romania awaits a major decision from the rating agency S&P in early June. Mihai Purcărea, CEO of BRD Asset Management, explained during the ZF video conference „Restart Romania. What will the new economic era be like? “
“We are talking about very high financial costs for Romania and for all of Eastern Europe, but it seems a bit more in Romania. Before the crisis began, the cost of financing in euros was around 1.2%, now we are talking about a financing cost of 3.2% for 10 years. If the Romanian state went looking for financing in international markets, it would have to pay more than double than 2 months ago, “said Mihai Purcărea, CEO of BRD Asset Management, during the event.
Purcărea says this evolution is closely related to the rating decisions, as the rating agency S&P will announce on June 5 whether or not to lower Romania’s rating below the investment rating.
In terms of financing in local currency, costs have almost doubled, but the intervention of the NBR has managed to stop these increases and reach a medium level.
“Until the intervention of the National Bank, the cost of financing had increased enormously from 3.8% before the crisis to 6% for Romanian lei bonds. After the intervention of the NBR, through that decision to buy bonds in lei, the cost of financing decreased to 4.7%. It is still above the level since the beginning of the crisis, but has decreased significantly, “said Mihai Purcărea.
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