Money Buzz! Europa

Category: Economy

  • Sweden is looking at the transition to digital currency

    Sweden is looking at the transition to digital currency

    The Swedish government will analyze the feasibility of the transition to a digital currency, Bloomberg reports.

    Sweden is one of the first countries in the world to consider introducing a digital currency.

    The Central Bank of Sweden is already conducting a pilot project in partnership with Accenture Plc to introduce an electronic crown based on the same block chain technology as that used by other digital currencies, such as Bitcoin.

    The Minister for Financial Markets, Per Bolund, announced that an evaluation process was launched on Friday and is expected to end in November 2022.

    ”It is crucial that the digital payments market works securely and is available to everyone,” Per Bolund said.

    The evaluation will be led by Anna Kinberg Batra, a former chairman of the Finance Committee of the Swedish Parliament.

  • COVID-19 is changing consumer behavior worldwide

    COVID-19 is changing consumer behavior worldwide

    COVID-19 is having a lasting, worldwide impact on consumer needs, preferences and behaviors, according to a new report from KPMG International.

    The survey tracks consumer trends between May and September 2020 across five industry sectors: consumer & retail (grocery and non-grocery), banking, insurance, entertainment & leisure and travel & tourism.

    Overall, the survey finds that consumers tend to trust brands less than they did pre-COVID 19.

    Insurance was the only sector to see a consistent net gain in trust in the May to September period; while travel & tourism and entertainment & leisure suffered the greatest erosion of brand trust.

    All sectors generally saw a modest increase in brand trust in September, with the exception of banking, which held even.

    Retailers will need to better understand the needs of the customer groups — via segmentation driven by AI and psychometrics. Personalization not only of communications, but also of developed products, will be key to meeting the needs of the new consumer. Besides, consumers are gravitating toward brands that are empathetic and supportive of their values.

    Consumer Commerce is the future. Bricks and mortar will remain an important channel although we know channel agnostic and customer centric is key and the competition will be much broader than today’s retail.”

    Nearly half, 45 percent, of respondents do not feel a strong financial impact, which could mean opportunities for businesses that are able to meet the new consumer’s expectations.

    All consumers predict they will spend less in the next 6-12 months and all are prioritizing savings. Perhaps not surprisingly, ‘value for money’ is ranked as the key purchase driver.

    Key trends in consumer behavior

    • Two in five (43 percent) of consumers are worried about their financial security in 2021
    • More than one-third (36 percent), are prioritizing savings over spending
    • 37 percent are working from home more, and 60 percent plan to do so more in the future
    • One in five (20 percent) want to stay at home as much as possible
    • Confidence in public transportation has declined 37 percent compared to before COVID-19
    • Net spend is expected to be 21 percent less over the next 6-12 months, versus pre-COVID-19
    • Close to half (45 percent) predict digital channels will be their main connection to brands
    • “Value for money” is ranked by 63 percent as the top purchase criteria
  • Volt analysis: What FICO credit score do Romanians have

    Volt analysis: What FICO credit score do Romanians have

    The average value of the FICO score in Romania is 635, according to a analysis performed on a sample of over 50,000 users of VOLT.

    Young people aged 18-25 face the greatest difficulties in accessing loans, as they have the lowest FICO score of 534.

    Microcredits paid on time can help them prove a good payment behavior and thus, increase their FICO score, a score identical to the solvency score of the Credit Bureau.

    The FICO score is an algorithm used internationally, mainly by banks, to determine the degree of risk for a person who applies for a loan, and is collected by the Credit Bureau.

    This score is the main factor that determines the type of credit for which the person in question qualifies.

    Its limits are between 300 and 850 and it is determined by several factors, such as the payment history, the number of score queries, or the total number of accounts.

    The FICO score can be queried for free in the Volt application and does not affect the credit score, as happens when the Credit Bureau is queried by banks.

    The average value of the FICO score in Romania is 635, according to a Volt analysis, a mobile application for instant money transfer, performed on a segment of its 50,000 users. Men have a better FICO score overall, with an average of 642, while the average score for women is 603.

    36.6% of VOLT users have a FICO score higher than 700, which means a low risk of default in the future. On the opposite end are the least conscientious in the payment of installments, 16.25% of users, with a FICO score below 500.

    These people have a medium to high risk of default in the future and have recorded 3 or more unpaid installments in their credit history.

    People with high incomes, of over 11,000 lei, have the best FICO score, of over 700, while people with a net monthly income of less than 3000 lei have a FICO score of 590.

    Young people have the lowest FICO score, of 534, for the age category 18 – 25 years old, and people from the age category 41 – 50 years old have the best FICO score, of 684.

    From the top 5 counties in Romania, the people of Arad occupy the first position, having the best payers, with an average value of FICO score of 697, followed by Volt users from Ilfov, Bucharest, Brașov, and Suceava. On the last place are those from Caras-Severin, with the lowest average value of the FICO score of 473.

  • The implications of COVID-19 for the Romanian financial system

    The implications of COVID-19 for the Romanian financial system

    Leonardo Badea, Deputy Governor of the Romanian National Bank, talked with Money Buzz! Europa about the implications of COVID-19 for the Romanian financial system.

    Mr. Badea says: ”The pandemic has affected the whole world and has already produced important changes in the economy. Almost all the systems and mechanisms by which economic activities were carried out so far are subjected to an extremely harsh test. The year 2021 promises to be just as difficult, at least during the first half, and the financial system might show some effects of deterioration of the quality of the loan portfolio. For the economy, the negative pressure will last probably for at least another 1-2 quarters, until through the efforts of the medical world and of the health system it will be possible to implement on a sufficiently large scale the measures to reduce the risk of disease.

    Undoubtedly the positive developments during the last month regarding the proven efficacy in clinical trials of several vaccines give us hope to finally get out of this crisis, to a new normalcy. However, it will take time for the economy to find its new equilibrium from which to start a new growth cycle.

    The COVID-19 pandemic had a number of immediate effects on the Romanian financial sector that were and continue to be adequately managed:

    • Operationally, the closure activities and the limitation of traffic (people and goods) have significantly affected the financial sector, like in many sectors of the economy, but not with the high intensity felt by the hospitality industry or airlines, and the necessary solutions for continuity were found and implemented (with great efforts).
    • The rapid intervention of the authorities (government, central bank, etc.) led to the avoidance of the liquidity crisis that could have been generated by these blockages both in the economy and in the financial system.

    From the perspective of the measures implemented by the National Bank of Romania (NBR) in the context of the COVID-19 crisis, the first ones chronologically were focused on payment and settlement systems. Given the rapid spreading of the negative effects of the pandemic, the NBR reacted promptly to provide credit institutions with the liquidity needed to accommodate both standard operations and the demand of bank customers for cash withdrawals. NBR provided banks uninterrupted liquidity for all transactions, including cash for ATMs. In the same context, NBR and the European Central Bank (ECB) signed an agreement that enables NBR, if necessary, to provide liquidity in euro for the local banks, through a repo line with the ECB.

    These measures on settlement and payment systems have been accompanied in the monetary policy plan by actions aimed at strengthening liquidity in the banking system and ensuring the proper functioning of the money market.

    The liquidity shock generated by the start of the COVID-19 pandemic in March 2020 was well managed by the banking sector. After a strong reaction in March, when the credit institutions needed to withdrawal important amounts of cash from the NBR to meet demand by population and businesses, during the following period the sources of bank financing from the non-governmental sector have increased, which shows that the balance was quickly restored.

    From a financial point of view, the impact of the pandemic crisis on the financial system has so far not been as visible as it has been felt in the economy, although some signs have been seen in the second and third quarters. Government measures to protect debtors affected by the pandemic and the easing of micro- and macro-prudential regulations have delayed this impact. Given that the share of loans held by the borrowers who have resorted to rate deferral facilities (based on the legislative moratorium and / or private moratoriums adopted by credit institutions) is at a level that cannot be neglected, the effect on the banking sector might become more visible after the expiration of the effects of the moratorium if the financial position of these borrowers will not allow them to resume payment of instalments.

    It is difficult to imagine that in an economic crisis of such proportions and which generates long-term structural changes, the financial system will not share some of the losses. Therefore, it is likely that we will see this at some point over the next year. Hence, creditors should initiate in advance the process of assessing the ability of borrowers to repay their loans after the expiry of moratoriums in order to identify problems and think of constructive and equitable solutions.

    The COVID-19 pandemic began at a time when the Romanian banking sector had a good risk resilience arising from the important capital consolidation in recent years, improved asset quality and a more liquid balance sheet structure. The increase in own funds available for loss absorption, the settlement of a significant part of the balance of non-performing loans and the consistent presence in the balance sheet of highly liquid assets (mainly government securities and exposures to the central bank) are other elements that contributed to strengthening the position of credit institutions.

    As of September 2020, the main health indicators of the Romanian banking sector were generally at better values ​​than those recorded in EU Member States. A significant proportion of the profit recorded in 2019 was retained and contributed to the improvement of solvency. As of September 2020, six months after the shock induced by COVID-19, the financial strength indicators of the banking sector are adequate:

    • total degree of capitalization: 22.8 percent (June 2020) (+3.1 pp annually).        
    • coverage with liquidity of 283.7 percent (September 2020) (+59.7 pp annually).        

    The non-performing loans ratio (4.1 percent, September 2020) re-entered a downward trend and the provisioning rate for non-performing loans (63.4 percent, September 2020) continued to place the banking sector in a more favourable position compared to the European average. The future evolution of the non-performing loans rate will depend on the speed of recovery as well as on the timing and manner of withdrawal of government support schemes.

    Among the factors that could mitigate the adverse effects of the crisis on the banking sector in Romania is the fact that before the onset of the pandemic companies with bank loans (at aggregated level) were in better financial health than the average recorded for the whole non-financial corporations sector. Even the companies that resorted to the suspension of rates payment had previously (at the end of 2019), on average, financial health indicators that placed them outside the risk area. Moreover, the resilience of the population sector has improved considerably compared to the situation before the global financial crisis. During the 12 months period before the outbreak of the pandemic, its net worth increased (by 11%) on both important components: in terms of real estate assets and in holdings of financial assets, the latter giving a higher degree of liquidity available for unforeseen situations.

    The profitability of the banking sector for the first nine months remained below the level recorded in the similar period of the previous year, a decrease that can be considered normal given the circumstances and which does not cause problems on financial stability.

    During this period, the Romanian banking system faces a threefold challenge:

    (1)   To support the flow of credit under the new macroeconomic conditions characterized by vulnerabilities and uncertainties ;  

    (2)   To manage the growing financial risks and to maintain its robustness ;  

    (3)   To adapt its activity to the new constraints generated by the need of a secure environment for employees and customers, but also in the context of the desire to improve operational efficiency and increase the degree of digitization.

    From this perspective, the pandemic crisis is more than just a test of the robustness of the system, for which, as we have seen, banks are well prepared. It is also a challenge to fulfil as well as possible its vital role in the economy.

    The crisis we are going through has already shown, more than the previous crises, the need to improve the structure of the economy by increasing the activities to protect the environment, implement and support technological innovations (especially in the digital field), increase inclusion and reduce inequalities. I believe that none of these objectives can be optimally achieved without the involvement of banks in providing at least a substantial part of the necessary funding”.

  • US imports from China grows by 126% to $292 billion amid pandemic

    US imports from China grows by 126% to $292 billion amid pandemic

    Data presented by Bankr indicates the United States imports from China have grown by 126.29% to $292.64 billion between March to October 2020.

    As of October, the value of imports stood at $44.83 billion, the highest figure during the review period. In September, the value stood at $41.21 billion, a growth of 0.9% from Augusts’ $40.82 billion.

    In July the value of imports was $40.66 billion while in June the figure stood at %37.64 billion. The figure represented a growth of 2.8% from May’s figure of $36.6 billion. In April, the value stood at $31.07 billion, while in March, it was at $19.81 billion.

    The research also reviewed the value of China’s imports from the US during the same period. The value increased by 84.69% to a total value of $81.76 billion, which is at least 3.5 times less than US imports from China.

    The highest value of China imports from the US was in October at $14.7 billion, an increase of 27.6% from September’s $11.53 billion. As of August, the value was $11.03 billion, an increase of about 22% from July’s $9.03 billion.

    As of June, the value was $9.24 billion, while in May, the figure stood at $9.64 billion. In April, the value was $8.6 billion, while in March, it was at $7.97 billion.

  • Italian GDP expected to increase by 4% in 2021

    Italian GDP expected to increase by 4% in 2021

    In 2020 Italian GDP is expected to decrease by 8.9% and then increase in 2021 (+4.0%), latest Istat data shows.

    This year, the domestic demand net of inventories will provide a negative contribution (-7.5 p.p.) together with foreign demand (-1.2 p.p) and inventories (-0.2 p.p).

    In 2021 the domestic demand will provide a positive contribution (+3.8 p.p) together with net exports (+0.3 p.p.) while inventories will contribute negatively to GDP growth (-0.1 p.p.).

    Labour market conditions will follow GDP evolution over the forecast period with a sharp fall in 2020 (-10.0%) and a recovery in 2021 (+3.6%).

    At the same time, the rate of unemployment will decrease at 9.4% in the current year and will increase at 11.0% in 2021.

  • Greece GDP recovered in Q3 2020 and recorded a 2.3% increase

    Greece GDP recovered in Q3 2020 and recorded a 2.3% increase

    Greece emerges worst quarterly economic decline reporting a 2.3% increase in third quarter of 2020, Reuters reports.

    Greece’s GDP contracted by 14.1% in the second quarter of 2020, the worst decline in at least 25 years, according to revised data released by Athens.

    Greek economy decreased by 11.7% between April and June 2020, confirming official expectations of a more than 10% rebound this year as a whole.

    ”The decrease in tourism by about 75% is reflected in the annual economic data”, said Nikos Magginas, chief economist of National Bank of Greece.

    On Thursday, Greece announced an extension of the restrictions imposed after the second wave of the pandemic until December 14, due to the still high number of coronavirus infections.

  • Households in the EU have devoted almost a quarter of income to housing costs

    Households in the EU have devoted almost a quarter of income to housing costs

    In 2019, nearly a quarter (23.5%) of household consumption expenditure was devoted to ”Housing, water, electricity, gas and other fuels”, Eurostat reports.

    This is the EU’s largest household expenditure item by far, ahead of ”Transport” (13.1%) and ”Food and non-alcoholic beverages” (13.0%), followed by ”Restaurants and hotels” as well as ”Recreation and culture” (both 8.7%).

    The remaining household spending was distributed over ”Furnishings, household equipment and routine household maintenance” (5.5%), ”Clothing and footwear” (4.6%) and ”Health” (4.4%).

    ”Alcoholic beverages, tobacco and narcotics” stand at 4.0% of household consumption expenditure, ”Communications” account for 2.4%, ”Education” (0.9%) and ”Other” (11.2%).

  • Austrian economy grew by 12% in Q3 2020 compared to previous quarter

    Austrian economy grew by 12% in Q3 2020 compared to previous quarter

    From July to September 2020, the Austrian gross domestic product (GDP) increased by 12.0% in real terms compared to April to June, as Statistics Austria reports.

    Compared to the third quarter 2019, a decline of 4.0% in real terms was recorded.

    The temporary easing of measures to contain the COVID-19 pandemic stimulated nearly all industries, private consumption, capital formation as well as foreign trade.

    Overall, however, the economy remained below the pre-crisis level.

    Recovery of consumption

    In the third quarter of 2020, consumption of private households showed a substantial growth of 13.3% in real terms compared to the previous quarter.

    The decline of 5.1% compared to the third quarter of 2019 can be traced back to a still weak demand for services.

    In contrast, demand for durable consumption goods, in particular furniture, recorded a substantial catch-up effect (+7.7% in real terms compared to the previous year’s third quarter).

    Surge in growth of services

    Nearly all industries recovered during the summer months. Above all, the industries most affected by the lockdown during the first half of the year recorded remarkable real growth rates from the second to the third quarter.

    Trade and transportation as well as accommodation and food services grew by 32.9% (-4.5% compared to the third quarter of 2019).

    Arts, recreation and personal services increased by 39.2%. However, the losses were not fully compensated (-7.7% in real terms compared to the third quarter of 2019). 

    Manufacturing and construction also recorded an increase

    Manufacturing also gained momentum during the third quarter of 2020 (+15.7% in real terms compared to the previous quarter, -4.0% in real terms compared to the previous year’s quarter).

    Construction recorded real growth of 10.1% compared to the previous quarter and thereby reached pre-crisis levels (+0.2% in real terms compared to the previous year’s quarter). 

    Industries which were rarely affected by the lockdown, such as real estate activities, public administration and health services, remained overall stable (real estate activities: -0.4% in real terms compared to the second quarter and +1.5% in real terms compared to the third quarter of 2019, public administration and health services: +0.5% in real terms compared to the second quarter and +0.6% in real terms compared to the third quarter of 2019).

  • Digitization requires the adaptation of supervisory models to prevent vulnerabilities

    Digitization requires the adaptation of supervisory models to prevent vulnerabilities

    The European Commission has recently adopted a new Digital Finance Package, including Digital Finance and Retail Payments Strategies as well as legislative proposals on crypto-assets and digital resilience.

    The Commission has proposed for the first time a new legislation on crypto-assets (a digital representation of values or rights that can be stored and traded electronically) – the ‘Regulation on Markets in Crypto Assets’ (MiCA).

    The new regulation is intended at providing legal clarity and certainty for crypto-asset issuers and providers, a contribution to seizing opportunities and reducing risks in this new field.

    The Commission is also proposing a pilot regime for market infrastructures that wish to try to trade and settle transactions in financial instruments in crypto-asset form.

    The pilot regime represents a so-called ‘sandbox’ approach – or controlled environment – which allows temporary derogations from existing rules so that regulators can gain experience on the use of distributed ledger technology in market infrastructures, while ensuring that they can deal with risks to investor protection, market integrity and financial stability.

    ”The Financial Supervisory Authority in Romania supports technological innovations in the non-banking financial field. Digitization will change interaction habits and bring with it new challenges in risk management. Therefore, we will have to adapt our supervisory and control models in order to be one step ahead and to prevent potential vulnerabilities” said the President of the Financial Supervisory Authority, Nicu Marcu.

    Another significant legislative proposal is the ”Digital Operational Resilience Act” (DORA) aimed at mitigating cyber-attacks and improving the supervision of the outsourced services.

    Technology companies are becoming more and more important in the area of finance, both as IT providers for financial firms, as well as providers of financial services themselves.

    The proposed legislation will require all firms to ensure that they can withstand all types of Information and Communication Technology (ICT) – related disruptions and threats.

  • Poland: New measures to support the economy amount to USD 10 billion

    Poland: New measures to support the economy amount to USD 10 billion

    Poland is set to start a program worth about 9-10 billion dollars, meant to help the economy cope with the effects of the second wave of the coronavirus pandemic (Covid-19), Reuters reports.

    The largest economy in CEE has weathered the first wave of the pandemic, but after a strong recovery in the summer it looks set to enter a recession in the fourth quarter, due to the effects of restrictions to stop the increase in confirmed cases of Covid-19.

    The new program will be worth 35-40 billion zlotys ($ 9.33-10.67 billion), of which three billion zlotys for micro-enterprises, five billion zlotys for small businesses and the remaining 24-27 billion zlotys for medium and large companies.

    During the first wave of the pandemic, the Warsaw government and the Central Bank of Poland adopted programs to support the economy, loan guarantees and liquidity measures worth more than 300 billion zlotys.

  • UK consumer spending to fall by nearly £200 billion in 2020

    UK consumer spending to fall by nearly £200 billion in 2020

    Total UK consumer spending is expected to fall by a staggering £183.6 billion (14.9%) this year due to the COVID-19-induced lock downs, according to new research from Mintel.

    This equates to a drop in spending of around £6,600 per household – with the biggest decreases occurring in the transport, foodservice, and holiday industries.

    Consumer spending in these three categories will fall by an astonishing £140.1 billion in total, or just over £5,000 per household – representing around 77% of the overall decline in consumer spending this year.

    Three categories are expected to bounce back in 2021: spending on transport will increase by £32.3 billion compared to 2020, foodservice will rise by £17.7 billion, and holidays by £19.2 billion.

    This represents an increase in spending of just under £2,500 per household; however, this will still only represent a return to pre-pandemic levels.