The world is going through a period of intense stress and is likely to experience the financial crisis for another year, believes Eric Boyer, a member of ING Group's executive board and head of the wholesale banking division. "Based on my thirty-year experience on financial markets, where I have witnessed seven or eight crises, I can say that this is one of the most powerful. As the '97-'98 crisis needed at least two years to resorb, my intuition tells me that it is impossible that the current crisis ends sooner, and therefore we are likely to have one more year of financial strain ahead of us," Boyer told ZF in a recent interview. He believes that, unfortunately, there is no tangible sign of an improvement in the situation on financial markets.
"The best proof has to do with the operating conditions on the interbank markets, where big players are still in need of substantial support from central banks to cover their cash needs. Then the refinancing conditions on the capital markets are very expensive and maturities are generally short. I wouldn't go as far as to speak of worsening conditions, but it is clear that there is a convergence of factors that reveal tense circumstances."
He also notes that, unlike previous crises, which were rather regional in scope, the current crisis has already generated global effects, despite originating chiefly in the US. "Surely the developed countries are the worst affected and we are already seeing an economic slowdown and even negative economic growth there. However, the impact on emerging markets is not something to be overlooked either, because they are fully connected to the developed market."
Boyer says Central and Eastern Europe has not been dramatically affected yet, as the trend of the economies in the region depends on access to natural resources, especially energy-related. "Asia is doing very well at the moment, but it will most likely see its growth slow down, too." A "striking" peculiarity of the current crisis is the trend of the risk premiums in refinancing costs. "I have no doubt seen an increase in risk premiums at all levels in the past year, but the huge difference compared with previous crises is that the extent of the respective increase for emerging markets was much smaller, which illustrates a clear improvement in the risk perception of investors." The head of ING's wholesale division recalls that risk premiums "went through the roof and hit the stratosphere" back in ?97.
"Ten years later, we can see that, based on a certain discipline in applying economic policies and solid foreign currency reserves in emerging countries such as Romania, the risk premium is much lower because there is more trust." Under the circumstances, he also notes that the multinationals are first of all concerned about the economic slowdown in the eurozone and are shifting some of their investments to emerging markets betting on substantial potential.
"Romania remains an attractive choice for groups interested in expanding operations in the region, and ING is no exception to that," Eric Boyer adds.
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