Romanian households saw a substantial increase in their stock of bank loans, which rose by RON12.7bn (€2.54bn) in the 12 months to August 2024 (chart) — a 7.4% year-on-year increase that brought the total to RON185bn. This is a sharp contrast to the previous 12-month period, which saw a modest RON0.3bn or 0.2% rise, according to data from the National Bank of Romania (BNR).

The surge in private consumption during 2024 was fueled not only by higher net wages but also by an uptick in bank lending. Improved household confidence, bolstered by increasing real incomes, played a key role in driving borrowing activity.

Most of the rise in the stock of retail loans was in the consumer loans segment, where the stock of loans increased by RON9.7bn (+15.5% y/y to RON74.4bn) in 12 months to August 2024 – which accounted for 77% of the total rise in households’ loans in the period and was nine times larger compared to the RON1.1bn advance in the previous 12-month period. This contributed directly to private consumption.

The stock of mortgage loans increased by only RON2.8bn (+2.7% to RON107.6bn) in 12 months to August 2024, but this compares positively to the RON0.8bn decrease in the stock of mortgage loans in the previous 12-month period.

More precisely, the Romanian households started borrowing at a more sustained rate in February 2024, after the inflation eased and the consumer confidence rose in line with the real wages. The loan interest rate, which decreased later in the year, was of secondary importance in the loan-taking decision.

Separately, the Romanian households were able to increase their stock of bank term deposits in 12 months to August 2024 – but at lower rate compared to the previous period: by 18% y/y or RON29bn (to RON192bn – more than the stock of bank loans) compared to +46% (+51bn) in the previous 12-month period. So the households were able to save in term deposits in 12 months to August 2024 more than twice than they borrowed from banks. 

This was possible thanks to massive (+RON39bn) supplementary bank (sight and term) loans boosted by higher nominal incomes. The propensity to save was stronger in the previous 12-month period, when households diminished their sight deposits (-RON17bln) to place their money in term deposits (+RON51bln), encouraged by higher deposit interest rates. The propensity to save diminished since the beginning of this year, concomitant with the rise in borrowing.