RISKS INDUCED BY THE TREND AND LEVEL OF FOREIGN DEBT IN ROMANIA

Abstract

The article presents some risks of external debt in Romania generated by its structure and characteristics. Given the rise in the share of short-term external debt, the associated risks increase, among which there is the augmentation in the volatility of the exchange rate of the national currency, the advance in the probability of a currency crisis and the vulnerability to interest rate fluctuations. The author calculates specific indicators from the economic literature in order to attain the paper’s objectives, namely, to see what the situation of Romania’s indebtedness is and if there is a vulnerability to an external debt crisis. In addition, other indicators are used to assess the debt characteristics of an economy. The values of the calculated indicators show that two shocks have been felt during the analysed period; the first is the economic-financial crisis triggered in 2008, and the other is the COVID19 pandemic. The results show that Romania is vulnerable to the outburst of a foreign debt crisis, with a risk of having problems regarding debt repayment. The methodology used joins the empirical analysis of statistical data and their interpretation, with the identification of correlations.

Keywords

• hazard
• external indebtedness
• vulnerability
• crisis