C-Bank Governor confident in Moldova's ability to avoid economic crisis

The National Bank's Governor Leonid Talmaci says there is no financial, neither economic crisis in Moldova, and there are no factors that could trigger it in the near future. He made this statement at the discussion club the Free Economic Zone on October 22, Info- Prim Neo reports. The Governor says Moldova's banks were ready for this crisis, they having the experience of two crises – the regional financial crisis in 1998 and the 2006 crisis triggered by the Russian embargo on Moldovan wines. “The results are know to all the Moldovan citizens – there was no holding back payments, no problems with liquidities. The banks operating in Moldova as branches of foreign banks did not have to suffer,” Talmaci said. According to the Governor, the banks not not have problems with returning loans, since their loans were allowed by their mother-banks or through credit lines opened by international entities as the EBRD, the Black Sea Bank, the South-East European Fund. A factor positively depicting the Moldovan banking system, according to Talmaci, is the very low percentage of the non-performing loans – up to 4.5%. This small amount cannot influence the banks' capacity of crediting, of intermediating and supplying the GDP with money. The inflation in Moldova for the last eight months was among the smallest in the region – 6.7%. The inflation for 9 months is expected to be over 7%, and the annual rate won't exceed 10%, Talmaci said. That is happening, he says, due to the BNM's efforts, which has ordered to raise the compulsory reserves of the commercial banks, and due to the Government which keeps the budget deficit to the zero level: these measures are deemed to lower the pressure on inflation and the exchange rate. The bank deposits rose 22% in the first 9 months year on year. The loans are up 4 billion lei, that is 22%, in economy. The banks' liquidity – their capacity to return the money to depositors on first request – is established at the level of 20%, but actually is over 34 %. Referring to the exchange rate, Talmaci say the leu strongly appreciated because the remittances soared 67% ($1.2 million), the foreign investments grew 2.4% , as well as the export. “We have sterilized a part of the monetary mass. Had the BNM not intervened, the rate could have reached 7 lei a dollar or even 6 lei a dollar. We did not have many options, as you cannot counter inflation and keep a stable exchange rate concomitantly,” the Governor said. Leonid Talmaci predicts the foreign earnings could decrease, as some of them will lose jobs in constructions and services. “In 1998 we did not have remittances and did it fine”, the Governor said. Referring to possible drops in exports, as the people in countries stricken by the crisis lose their Purchase Power Parity, the Governor stated: “We've got an advantage. Moldova is dependent on a single market – Russia's one – any longer, as it was in 1998.”