Romanian stocks resume fall, central bank warns over deficit

Romanian bank stocks resumed a fall on Monday as central bank (NBR) governor Mugur Isarescu clashed with the government over the draft 2019 budget which includes a new tax on banks, according to

The plan, which also increased taxes on energy firms to compensate for rising state spending, was first announced two months ago and caused a plunge in Romanian asset prices.

The shares of lenders Banca Transilvania and BRD Groupe Societe Generale fell 6-7 percent in early trade to one-week lows ahead of a news conference by Isarescu.

The governor presented the bank’s new inflation report, but also addressed the tax issue, as expected.

The tax on bank assets has complicated monetary policy as it is linked with interbank interest rates, while the resulting worries over the business climate knocked the leu to record lows versus the euro last month.

While Isarescu said the leu’s reaction was disproportionate, he warned that consumption boosted by a strong rise in wages was not in line with output, and that Romania had a growing current account deficit problem.

He said the government should not tie the tax to the ROBOR money market rates.

Data released earlier on Monday showed a 12.5 percent annual increase in the net average wage in December, and a 17 percent rise in the trade deficit in 2018 to 15.1 billion euros.

Bucharest’s blue-chip stock index was down at 1.8 percent at 1016 GMT, with Banca Transilvania and BRD shares shedding over 4 percent.

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