The stock of bank loans to the non-government sector in Romania edged up marginally on the month by 0.2% to RON 221.9bn [EUR 50bn] at the end of August - yet lagging by 2.6% on the year, the central bank announced. The monthly advance in August was a result of the short-term exchange rate volatility but on a broader perspective the local currency has remained rather stable nominally and the annual contraction of non-government loans is pretty comparable when expressed in either local currency [2.6% y/y] or foreign currency [2.1% y/y].

The stock of non-government loans has contracted by EUR 1bn [2% ytd] in Jan-August this year after already narrowing by EUR 0.6bn in 2012. The downward pattern seen over the past two years follows another two-year credit expansion period in 2010-2011. Overall, the stock of non-government loans remains below the EUR 52.7bn peak reached at the end of October 2008, before the credit crunch.

Mortgage lending to households has increased significantly by 11.2% y/y to EUR 9bn at the end of August and accounts for 17.2% of the total bank loans [17.9% of non-government loans]. Mortgage lending, supported by the government guarantees programme, has partly offset the major 10% y/y decline in the stock of consumer loans that reached EUR 12.2bn at the end of August. Mortgage loans more than doubled from the EUR 5.2bn at end-Oct 2008. Consumer loans were nearly EUR 20bn before the credit crunch at end-Oct 2008. But even more concerning is the 2.5% y/y contraction in corporate lending. The interest rate cuts over the past months have pushed up the stock of local currency corporate loans by 2.4% y/y – but this slim improvement was insufficient to maintain the overall stock of loans to non-financial corporations on a positive annual trend.