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| MONETARY DEVELOPMENTS AT THE BEGINNING OF THE YEAR 10/01/2008 |
| (2008-01-10) |
| Last updated: 2008-01-10 17:03 EET |
Romania’s national currency, the leu, continues to lose ground against the euro. On Wednesday the leu exceeded the psychological threshold of 3 lei and 60 bani against the euro, a level that was last reached in June 2006. Given that the country has a lot of hard currency brought in during the holidays by Romanians working abroad, economic analysts blame the leu’s depreciation mainly on speculation by big investors on the currency market. Razvan Voican from the daily “Ziarul Financiar” comments:
“This drop registered by the leu may be related to what’s going on on the stock exchange, where quotations continued to drop significantly. And this may be due to capital withdrawals by investors. Recent developments show that the interest rate increase made by the central bank was not considered sufficient to cover the risks related to the Romanian market; on the contrary it was a boost to maintaining and even bringing further capital onto the market. And what happens on the domestic market can be linked to what goes on in the foreign ones. The investors’ appetite for risk has again shrunk as they sought sanctuary in reliable values such as gold, which is again being traded for a record high price. Also, the pressure of oil price increases is looming and a market whose vulnerability has been hyped-up by the more pessimistic analysts can see fluctuations that are clearly seen in the currency rate and the stock exchange.”
Analysts are still pessimistic as regards the chances of the Leu’s appreciation, given that a high inflation rate and a widening of the external deficits are likely to get worse, at least for the first semester of 2008. Most of the forecasts reveal the Euro might rise as high as 3.7 lei by March. On Wednesday the national currency also lost ground to the dollar, as the National Bank’s exchange rate for the dollar stood at 2 lei and 46 bani. In another development, this year’s World Bank’s estimates suggest that Romania will witness a GDP increase of almost 6%, also predicting a rise of the current account deficit to 15% of the GDP. The National Commission of Prognosis indicates economic growth of 6.5%, also anticipating a current account deficit of about 14%. World Bank officials expressed their concern over the current account deficit hampering several countries in the region, including Romania, drawing attention to the potential risks of over-warming and the emergence of important foreign deficits.
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2025-04-03
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