mugur isarescu : gaps and economic crises in south - east europe – present and past opening speech by mr mugur isarescu, governor of the national bank of romania, at the conference " gaps and economic crises in south - east europe : present and past ", bucharest, 28 october 2016. * * * distinguished guests, ladies and gentlemen, allow me to warmly welcome you to the national bank of romania. the board of the national bank of romania and i are glad to host, for the second time, the annual conference of the south - east european monetary history network. five years ago, in march 2011, when nbr hosted this event for the first time, we expressed our interest and support. we firmly believe that a good understanding of history, of how our forerunners addressed issues linked to monetary and economic developments, sets the foundation for finding solutions to present day challenges. this conference brings together central bank representatives from albania, austria, bulgaria, greece, serbia and romania, as well as prominent members of academic and scientific european circles. i welcome you to romania and hope you will have opportunity to enjoy your brief stay. this year, the meeting is focused on economic cycles and economic crises in south - east europe, both past and present. this is a generous and challenging research topic. all the more so, there has always been a permanent concern in the past 150 years for the policy makers in the region to reduce the economic gaps between the countries in south - east europe and the developed ones. in spite of this preoccupation, the real life was, in almost all the cases, different. this kind of historical research, stretched over a longer period of time, could reveal to which extent the solutions adopted in time were the appropriate ones. given the interest shown by both economic and political decision - makers, we find it useful to highlight the role that central banks have played in the catching - up process. i have to confess that i am personally interested in this topic and i look forward to seeing the outcome of your debate. i do wish you success. allow me to say a few words about the south - east european monetary history network. after a decade since it has been launched in sofia, the network achieved notable results in its aim to collect and extract value from statistical and historical data. the most important one was the release, in 2014, of a book titled “ south - eastern european monetary and macroeconomic statistics from the nineteenth century to world war ii ”. it

national bank of romania, as they capture appropriately the opinions of the real sector on some key issues, such as : ( i ) the most pressing problems that firms are facing in their activity ; ( ii ) the investment needs and priorities ; ( iii ) challenges raised by climate change and energy efficiency. the survey shows that firms in romania have become less optimistic regarding investment conditions for the year ahead. while this is a worrying trend, we are rather positive that romania will be able to overcome the main problem identified, the energy costs, in the near future. i would add here that the government has implemented several measures in this respect, such as electricity and natural gas price capping schemes, the compensation of the price of motor fuel / liter and caps on the firewood price. also, we are aware that the war in ukraine and the related sanctions will continue to generate considerable uncertainties and risks to the outlook for economic activity, through possibly stronger effects on consumer purchasing power and confidence, as well as on firms'activity, profits and investment plans, with an unfavorable impact on financing costs. in this current juncture, the balanced macroeconomic policy mix and the implementation of structural reforms, including the use of eu funds to foster the growth potential over the long term, are essential in preserving a stable macroeconomic framework and strengthening the capacity of the romanian economy to withstand adverse developments. with respect to the national bank of romania's responsibilities, we aim to anchor inflation expectations over the medium term, to bring the annual inflation rate back towards the target, in a manner conducive to achieving sustainable economic growth. the annual cpi inflation rate is projected to follow a gradual downward path, but to remain slightly above the variation band of the target also next year. the prudential and financial position of the romanian banking sector - the main source of finance to the economy - is adequate. however, the risks are rising both locally and internationally. the total capital ratio remained adequate, above the eu average, but the capital reserve shrank once with the marking to market, because of the fast - paced interest rate rise. asset quality continued to improve, with the non - performing loan ratio falling to european levels and the npl coverage by provisions staying at significantly higher levels than the european average ; profitability increased. yet, romania's banking sector faces a number of vulnerabilities : ( i ) expectations on a higher risk of default on private sector loans amid worsening macroeconomic conditions, the uncertainty