Analysts have revised upward their forecasts for the Romanian leu’s exchange rate following political turmoil and capital outflows in recent weeks, although most projections still imply further real appreciation of the currency after years of nominal stability amid elevated inflation.

The leu weakened rapidly during the latest wave of market tensions, briefly approaching RON 5.3 per euro, but economists noted that the currency still remains stronger in real terms compared with previous years due to Romania’s persistently higher inflation relative to trading partners.

BCR, Romania’s second-largest bank by assets, said in a recent report cited by Ziarul Financiar that it now expects the exchange rate to reach RON 5.25 per euro by the end of 2026, compared to its previous forecast of RON 5.17. For the end of 2027, the bank projects a level of RON 5.35 per euro.

According to BCR analysts, macroeconomic models indicate that the Romanian currency remains somewhat overvalued even after the recent depreciation episode, although the gap has narrowed substantially.

The bank estimated the leu’s “fair” exchange rate at around RON 5.35 per euro. However, analysts also argued that the National Bank of Romania (BNR) is likely to limit further currency weakening given the strong transmission from exchange rate movements to inflation.

According to BCR estimates, a 1% depreciation of the leu adds approximately 0.3 percentage points to inflation. Romania’s annual inflation rate currently remains close to 9%-10%.

A weaker currency would also increase the burden of Romania’s foreign currency-denominated public debt and raise repayment costs for households and companies with loans in euro or other foreign currencies. Around 30% of loans in Romania are still denominated in foreign currency.

Economists also noted that higher exchange rates tend to correlate with rising non-performing loans, potentially increasing pressure on banks’ balance sheets.

At the same time, the depreciation of the leu raises import costs and may further weaken consumption through lower confidence and reduced purchasing power, adding to concerns over slowing economic growth.

A weaker currency could theoretically improve export competitiveness and support a reduction in Romania’s trade deficit, although analysts cautioned that the effect varies significantly across sectors depending on the share of imported inputs embedded in exported products.

iulian@romania-insider.com

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