“We could see a weak euro in the near future. The euro zone relies on exports more than the United States and the United Kingdom. This is why we have to be honest and say the truth: I do not believe that EU’s institutions will mind if the euro depreciates,” Knightley said. The European currency could also depreciate against the leu. Analysts of the Citi financial group forecast that the leu will gradually appreciate in 2009, to RON 3.95/€1 by year-end. This strengthening of the leu could happen, considering the improvement in the macroeconomic frame due to the loan granted by the International Monetary Fund (IMF) and the EU and the above-expectations narrowing of Romania’s foreign deficit. Moreover, the ING Romania lender revised its estimates regarding the evolution of the national currency. Thus, ING expects a RON 4.3/€1 exchange rate in the second quarter, compared to its initial forecast of RON 4.45/€1.
Analysts within Citigroup said that the intention of the National Bank of Romania (BNR) to further cut the benchmark rate this year could also impact on the national currency’s exchange rate. Citi estimates that BNR will lower the key interest to 7.25 percent by year-end, and forecasts an exchange rate of RON 4.1/€1 at mid-2009 and of RON 4/€1 at the end of the third quarter. “There are signs of improvement of the world economy, but this does not mean that the recession is over. We see rebound signals, but not signs of growth. Declines are slowing, but it will take some time before the economy starts growing again,” Knightley told Business Standard.
