RSS
Isarescu: Leu could remain stable if Romania avoids domestic economic problems
National Bank of Romania (BNR, the central bank) Governor, Mugur Isarescu, declared on Thursday that the leu could remain stable against euro in 2016, provided domestic macroeconomic disturbances were avoided, as they can increase the impact of international economic instability including in the area where Romania is located.
“The leu was stable because 2015 macroeconomic conditions were stable. We had a good macroeconomic situation and that was reflected without the need of the National Bank’s sustained intervention while these stable conditions reflected in market stability and the relative stability of the leu. For the future, despite the fact that international economy and the are we are located have not been stable and indirectly we say that this is the frame in which we must think of the future. In case domestic macroeconomic situation remains stable, we will not witness deteriorations of indicators and bigger unbalances and there is the premise of the leu being stable,” the governor said at a press conference.
Foreign influences may unbalance the situation, Isarescu warned.
“A year before, in 2014, we had such an experience, the crisis in Turkey, Ukraine and we know what it means. A blurry international context, or even blurrier than this year, bigger volatilities and more ample movements of capital will influence us as they have done so far, they might create temporary unbalance in the market and the problem is not to feed such a foreign unstable environment, which seems to be so this year and in the future. We must not feed it with domestic economic problems, with unbalances which are hard to manage, “ he said.
According to an ING Romania research note, the transaction interval agreed by BNR for the leu is 4.38 - 4.52 lei/euro.
“We will have in view BNR indications today, after the monetary policy meeting, because a year ago the governor suggested the transaction interval of 4.38- 4.53 lei/euro, which generally maintained in 2015. Due to the limited benefits of a weaker leu, we do not think the interval will be moved upper,” according to the research note published by ING Bank Romania economists on Thursday, before the press conference of the BNR governor.
The euro exchange rate announced by BNR grew on Thursday by 0.58 bani, to 4.5257 lei/euro.
In the inter-banking market, euro was 4.5295 lei/euro at 6.00 p.m without significant variations after the governor’s declarations.
The reference grew at the end of 2014 to the maximum of two years, close to 9.54 lei/euro, but without exceeding that threshold. The depreciation took place on the background of the investors’ disappointment in the big financial markets following a decision of the Central European Bank and the investors’ repositioning in the context of the Fed decision to increase the monetary policy interest rate.
BNR calculates the euro exchange rate according to inter-bank quotations, while leu/dollar and leu/Swiss franc exchange rates are calculated according to the leu/euro parity and euro/dollar and euro/Swiss franc exchange quotations.
Isarescu: Wage raises are inevitable
Wage raises are inevitable, Mugur Isarescu also said in a press conference on Thursday. "In Romania, given the deepening of integration, of the freedom of movement of the workforce, the wage raises are inevitable. Due to this reason, because we see this wage raise as something no Government could avoid but with huge political and social risks, as well as economic ones, I thought that the fiscal relaxation is exaggerated and not very cautious. Unwanted things happen, two things which should not get along as they already did: high raises of incomes, concomitantly with important tax cuts. Now it's also the time to say what was won during last summer's disputes. Perhaps the haircut went a bit with 'bangs', the fiscal relaxation got a bit alleviated. If I were to put a figure on it, you saw that the current government too - with a 2.95pct [budget deficit], i.e. with the aim not to exceed 3pct - stays somewhere in-between the 0.4pct - 0.5pct it managed to save after the last summer's debates," he said.
Isarescu's comments were made upon the announcement of the central bank's board decision to keep unchanged the monetary policy rate at 1.75 percent per annum and to cut the minimum reserve requirements ratio on foreign exchange-denominated liabilities of credit institutions to 12 percent from 14 percent starting with 24 January - 23 February 2016 maintenance period.
On the same occasion, the governor said the politicians should be cautious with 'giving' during this electoral year, in order not to come to the situation of 'taking'.
"We should be more cautious," because macro-stability is like health - one finds out how important it was only when it's lost, he warned.