The volume of new loans extended by banks to Romanian households contracted by 3.6% y/y, in nominal terms, to RON 9.5bn (€2.0bn) in the second quarter of this year, according to bne IntelliNews calculations based on central bank data. Mortgage lending particularly lost momentum.
Household borrowing weakened for the second quarter in a row, in response to the tighter lending regulations enforced by the central bank as of January 2019. This development, as mentioned by the monetary authority in its monetary policy board decisions that kept the monetary policy rate constant, has visible effects on retail sales, moderating private consumption even while it remains a key driver of the economy supported by rising household incomes.
The 3.6% nominal contraction in Q2 comes on the top of 4% average inflation in the quarter, resulting in a real shrinking of the flow of new loans to households in excess of 7%. In the first quarter of the year, the new loans to households edged up a marginal 0.5% nominally, while it contracted by 3% y/y in real terms. Consumer lending was more active, but even the flow of new consumer loans advanced at rates below the annual inflation in each of the first two quarters of this year: by 2.5% y/y and 3.4% y/y respectively. New mortgage loans contracted nominally by 1.7% y/y in Q1 and 15.4% y/y in Q2.
Softer borrowing is consistent and may explain to a certain extent the discrepancy between the robust rise in households’ incomes and the comparatively modest performance of the retail sales. The average net wage in Romania increased by 15% y/y, or a real 10.6% y/y in Q2, while the retail sales volume moderated to 5.4% y/y in the quarter from 8.5% y/y in Q1.