Foreign direct investment has helped total factor productivity in recent years, yet if wages reach too high levels, attracting investment may become a problem. We therefore need to ensure that wage levels are compatible with attracting investors, but at the same time acknowledging that, at least in certain areas, wages need to go up at present, in order to mitigate the labour force drain that affects the private and public sectors alike. However, pay rises in the private sector should not be triggered only by an increase in public sector wages. While raising the minimum wage has been necessary, we should be very careful not to hurt employers, as they represent an important engine of the economy. The key is, in my opinion, to increase wages at an adequate, sustainable pace, in order for Romanians to ultimately benefit from an improved living climate reflected in a higher purchasing power, but also from preserved macroeconomic equilibria, as well as higher-quality public goods – especially highways connecting different regions of Romania, but also our country with the West. After all, wages are not the only side of the emigration story. 4. KEEPING THE EXTERNAL DEFICIT IN CHECK The wage matter is also closely linked to the topical issue of ensuring a balanced external position. To the extent to which the upward path of wage costs is too steep, it gets very difficult to preserve competitiveness, not only on external markets, but also on the domestic market.
Pursuing monetary policy to stabilise inflation and raising the key rate to achieve this, the Bank of Russia curbs growth in long-term interest rates in the economy. This quarter experience is a good illustration of the above. Despite the increase in the key rate on three occasions since last March for a total of 125 basis points, the yields of long-term OFZs are currently on the same level as in late March. As far as the pace of lending growth is concerned, it remains high both in corporate and particularly retail segments. Thus, mortgages are rising by more than 25% year-on-year. In addition, retail loans are heating consumer demand. We are also concerned by the fact that lending is growing due to loans to borrowers with a high debt burden. Therefore, we resume prepandemic macroprudential add-ons on unsecured loans from 1 July and on mortgage loans with a low down payment and a high debt-to-income ratio of borrowers — from August. The Bank of Russia will stand ready to further increase macroprudential add-ons to prevent the accumulation of systemic risks and to ensure financial stability. Since our meeting in April, the balance of risks has tilted even more towards proinflationary risks. Elevated inflation expectations as a response to high inflation and low interest rates still pose a major risk. With fears of future price growth, people tend to spend more today and save less for tomorrow. This makes prices grow even more rapidly. Disinflationary risks look weaker.