There is no common basis for the forecast of financial analysts for the evolution of the leu in 2008, as the minimum forecast parity is estimated at RON 3/€1, while skeptics are expecting a depreciation of the leu down to RON 4.5/€1, the level it reached five years ago.

The depreciation of the leu would boost exports and lower pressures brought on by imbalances, but could also raise risks for inflation, a major concern of the National Bank of Romania (BNR). In that case, BNR would be forced to intervene to regulate the exchange rate. 

BNR officials said they may raise the key interest rate. A stricter monetary policy would indicate that the Romanian economy is facing problems, which could increase doubts among investors.

While the evolution of the exchange rate puts divides analysts into two camps, the risks facing Romania’s economy are unanimously considered to be massive.

Florian Libocor, Analyst of BRD (Romania’s second-largest lender in terms of assets), is optimistic about the leu’s appreciation in 2008. “Adjustments, if any, will most likely be downward, toward or slightly below the level of three lei for one euro. Main risks are associated with an aggressive current account correction strategy adopted by the central bank," he said.
The National Prognosis Commission estimates a RON 3.18/€1 parity for 2008. An exchange rate lower than the current 3.37 would perpetuate the situation exporters have been facing this year, and significantly affect the balance of trade. Losses by exporters, computed by the National Association of Romanian Exporters and Importers (ANEIR) for July 2007, amount to €200 million.

“If the leu appreciates by one percent compared to its January 1 level, exporters will lose a monthly €25 million,” Mihai Ionescu, President of ANEIR, told Business Standard.  

Romania’s imports will likely remain double that of exports in 2008, due to uncertainties related to the exchange rate and the low level of competitiveness of exported Romanian products.
Evaluation agencies position Romania among high volatility countries, due to its high deficits, caused by the liquidity crisis generated by the U.S. subprime mortgage financial crisis, which creates great reluctance among investors, especially short-term. 

Because Romania depends on foreign financing, and foreign investors could perceive Romanian assets as having a high degree of risk, the result would mean spectacular capital exits from the monetary market, and implicitly, a massive depreciation of the Romanian currency.