According to analysts interviewed by Business Standard, this evolution is related to the regional trend, and to expectations that the loan tranche from the International Monetary Fund (IMF) will be postponed. For the end of this year, exchange rate estimates range from RON 4.15-4.75/€1. “'A delay in the next tranche will probably bring new depreciation pressures on the leu. It should be said that all this political instability, which can delay money from the IMF, can have a negative effect on the exchange rate, even if the National Bank makes an effort to keep the leu balanced,” Andrew Colquhoun, analyst at the Fitch rating agency, said.
“Anything can happen after the [presidential] elections. But I believe the IMF will not be as flexible as before. It will most likely request that taxes be raised. This is the only way. They have been more than flexible with us, but we did nothing, we did not adopt the law we should have adopted, we did not cut back on budget expenditure. The unpaid holiday is off. In these conditions, the deficit will exceed eight percent,” said Ionut Dumitru, Chief Economist of Raiffeisen Bank.
Gunter Deuber, Deutsche Bank analyst, said that the leu will return to 4.3 units to the euro by year-end. “We believe that, in the event the IMF does not release the tranche, repercussions on financial markets and the RON/EUR exchange rate after a few days, 1-2 days, of weakening, will be limited. First of all, not granting the tranche will not create immediate risks regarding Romania’s foreign financing. A temporary weakening of the Romanian currency, generated by the negative news related to the IMF mission in Romania, could take the exchange rate to 4.35-4.40 temporarily,” Deuber said.
However, there are also less optimistic scenarios: “We estimate the RON-EUR exchange rate at 4.20 at the end of 2009, but this forecast is based on the scenario that all the tranches of the IMF loan are granted. A decision by the IMF to freeze the next tranche will induce negative pressure on the exchange rate. We estimate the exchange rate will depreciate to 4.50 next year, but if the political situation deteriorates, there is a risk of a sharper depreciation – we can even imagine a drop to 4.75,” said Neil Shearing, Economist at Capital Economics in London.
