US bank Goldman Sachs argues Romania’s economy would benefit from currency depreciation
The real effective exchange rate (REER) of the leu is still too strong in relation to the fundamentals of the local economy, and Romania needs a depreciation of the real effective exchange rate (nominal exchange rate adjusted for differential inflation and weighted over a basket of currencies) to correct the external imbalance, according to an analysis carried out by Goldman Sachs economists Basak Edizgil, Alessa Abraham and Kevin Daly.
iulian ernst · Journalist
· 1 min read
“Romania’s position suggests that the unsustainable current account deficit is a bigger problem than [its second major macroeconomic challenge], the negative output gap,” the report said, as quoted by Cursdeguvernare.ro.
Under these circumstances, the adjustment should combine a weakening of the real effective exchange rate, “possibly through a larger one-off devaluation,” with a more restrictive fiscal policy.
