Analyst: National currency depreciates because economic and political imbalances and euro could climb to 4.7

The depreciation of the leu, mentioned lately, takes place on the background of economic imbalances in economy and political life. If they continue, euro might reach 4.75 lei, said economic analyst Dragos Cabat.

“Several causes influence the exchange rate, the most important being the increase of economic deficits - budget deficit, current account and commercial deficits. These imbalances and, obviously, the political ones depreciate the leu. Budget deficit determines the government to make more loans, imports grow compared to exports and all these lead to foreign exchange demand. And this demand makes foreign exchange more expensive,” Cabat explained.

“If these imbalances persist, we will remain in this depreciation trend in the following period of time, and we will go toward the 4.75 lei/euro quotation, at least until mid year. Or even earlier unless economy balances stabilize,” the analyst added. He showed the government needs more money, which leads to loans and influences the evolution of the exchange rate.

Referring to the behaviour of the National Bank, Cabat considers “it no longer backs the exchange rate because it would mean using money from the national reserve just for temporary control”.

Euro was quoted on Tuesday at a new historic peak, the third in a row, the official quotation listed by the National Bank of Romania being 4.6679 lei/euro, on the rise by 0.05% against the previous day.

On Friday, January 19, euro exceeded the threshold of 4.66 lei.

Euro oscillated on Tuesday between 4.6645 and 4.6698 lei, with moments when it exceeded 4.67 lei/euro.

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