Romanian currency’s 2-3% annual nominal depreciation “only natural”, analyst says

Romania’s currency (RON) has weakened for the fourth day in a row, by 0.07%, on November 21, and reached an overall decline of 0.3% over the four-day period amid concerns related to the exchange rate stability.

The central bank’s spokesperson, Dan Suciu, admitted that the exchange rate “accommodates” the macroeconomic fundamentals (the external deficit and the fiscal gap expected to surface in pressures on the external balance in the future), while independent analysts point to a somehow expected depreciation.

The dynamic of the local currency is natural [in line with fundamentals] and in the future we will probably see it losing ground in nominal terms at an annual rate of 2-3%, said CFA Romania president Adrian Codirlasu, according to local Agerpres.

As of November 21, Romania’s currency has weakened in nominal terms by 2.4% year-on-year versus the euro. The recent shift of the exchange rate should be regarded in the regional context, where other currencies have seen even steeper corrections, and should also be regarded in the context of Romania’s external and fiscal deficits - compared to current account surpluses and balanced public budgets reported by peers in the region, Codirlasu explained.

Separately, the significant inflation differential versus the euro area is also supporting the currency’s depreciation. The official EUR/RON exchange rate announced by Romania’s National Bank (BNR) reached RON 4.7808 for EUR 1 on Thursday, November 21, the highest level ever recorded. Meanwhile, the biggest banks on the local market were selling EUR 1 for over RON 4.85 on Thursday afternoon, according to Ziarul Financiar.

(Photo source: Shutterstock)