Credits go up as the economy slows down. Commentary by Info-Prim Neo

Credits on the internal market are getting dearer and this is unavoidable, as this is confirmed by the recent macroeconomic tendencies. The inflation rate reached in the past ten months almost 11% (10.8%) and in the last two months, the National Bank increased the base rate by 1.5 percentage points – up to 14% after a stability period of 14 months. The actions of the central bank have two aims. First – stability of prices. By increasing the base rate, NBM suggested the commercial banks that it is time for credit interests go up. Via this action, the central bank tries to limit the access of population to cheap financial means, part of which are used for consumption. This way, NBM wants to reduce the inflationist pressures, by partially equilibrating demand and supply on the consumption price. At present, many shopkeepers raise the prices only to exaggeratedly increase their incomes, without risking negatively influencing the demand. Second – NBM seems to be concerned with the fast expansion of the consumption credit. These credits are provided in relatively small sums and to many persons, thus problems could occur while refunding these credits. Therefore, NBM tries to prevent some system difficulties. Referring to the increase in the base rate by NBM, the chairman of “Mobiasbanca”, Nicolae Dorin told reporters that in this way “the National Bank expressed its concern regarding the easy access to credits”. [How much will the credits cost?] As a result, the fastest increase in price might occur for the short-term credits (1-12 months), including consumption credits. As estimated, in the next months, the average crediting rate in the banking system might reach 20-21%, similar to the level of 2004 and beginning of 2005. Therefore, for individual persons the average interest could reach 24%. As regards the long-term credits offered to economic entities, they will continue to be provided with lower interests than the average level of the system, thus it could range from 18 to 20%. [Failed initiatives] The firm orders of President Vladimir Voronin and of Prime Minister Vasile Tarlev concerning the reduction in the interest rate for the credits provided in national currency to the level of 15% annually failed to come true. The main causes of this situation are the difficulties from the real economy, which the Government failed to prevent and diminish their effects. The state of the industry and agriculture is not so good; the reforms are promoted with slower steps than necessary for a sustainable long-term economic growth. Therefore, the capacity of the national economy to absorb foreign investments is quite limited. Altogether, these problems will inevitably influence the currency-crediting policy of NBM. This way, the Government proved that it wasn’t able to profit from the waves of economic growth of the last years, which was spurred by the huge amount of money transferred by the Moldovans working abroad, and it stumbled encountering the first crisis situation.