Those that took loans in foreign currencies over the past few years when the RON was on its way up, are now getting bad news, because the instalment repayment effort will be much greater.
NBR calculated an exchange rate of 4.0296 RON/EUR yesterday, 4.44 bani
(1 RON equals 100 bani) more than the level published in the last day of 2008.
The current level is but one step away from the all-time high of 4.14 RON reached at the beginning of 2004.
Analysts are pessimistic and do not rule out a new all-time high for the exchange rate, with most forecasts, however, being capped at 4.2 RON/EUR.
"I don't think we'll see the euro at five RON this year. I expect the euro to be above 4 RON on average in 2009 and the first half will be the most hectic period in this regard. It also depends on how the international markets receive the steps taken by the Government," says Lucian Anghel, BCR's chief economist.
He points out that the Polish zloty, a currency the RON has been correlated with over the last few years, has witnessed even more serious declines, so that we can expect new increases of the euro on the Romanian market, as well.
According to the exchange rates calculated by the European Central Bank, the euro traded at 4.13 zlotys in Poland, while quotes in Bucharest went up to 4.04 RON/EUR.
In their recently published surveys, Raiffeisen and ING also indicate an increase of the euro to 4.2 RON in the first half, pointing out, though, the risk of this level being exceeded, as well.
The effects of the euro increase against the RON over the quality of the credit portfolios started to show as early as last year.
Lending in foreign currency accounts for 56% of the total loans granted by banks to the private sector. Individuals had 14.7 billion euros in loans in November, which accounts for 57% of the total amounts borrowed.
The delinquent loans of the individuals and of the small companies went up abruptly last fall, given that the average exchange rate nine months into the year had gone down by 10%.
An average exchange rate of a little more than 4 RON in 2009 means another depreciation of at least 10% compared with the average of 2009, 3.68 RON/EUR.
For instance, those that took out a mortgage loan in the summer of 2007 when the euro was trading at 3.1-3.2 RON, the instalment of which stood at 500 euros, now have to bear a considerably greater effort.
Converted in RON, the instalment went up by about 30%, to more than 2,000 RON, considering the euro is already selling at 4.1 RON at exchange offices. Analysts were seeing an important threshold at 4 RON/EUR, beyond which the effect of the more expensive instalments on loans in foreign currency for clients earning their incomes in RON becomes very hard to bear.
"The impact on loans depends on the speed at which the exchange rate goes up. If it is high, then we will see a negative effect," Lucian Anghel adds. On the other hand, he notes that it was delinquent loans in RON that have mostly increased thus far, namely consumer loans.
On the other hand, the loan delinquency increase in case of foreign currency loans backed by real estate collateral was slower.
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