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Deutsche Bank: euro will reach 4.4 lei
The leu will probably depreciate by 2.3% until the end of 2011, to 4.4 units for 1 euro, as exports need competitiveness stimulus because of the low foreign demand, a Deutsche Bank analysis quoted by Bloomberg shows. In the next three months the leu will reach 4.33 units for 1 euro, compared to 4.3 units at present, said Caroline Grady and Marc Balston, analysts at Deutsche Bank London in a note addressed to its clients, Mediafax shows.
The leu has continued to record minor oscillations against the single currency, while BNR calculated a reference exchange rate of 4.3005 leieuro, 0,07 bani more than the Wednesday quotation of 4.2998 leieuro. The National Bank of Romania has a low interest in the appreciation of the leu because of the limited economic increase anticipated for next year, in the conditions in which the country will get out of a deep reception, according to Deutsche Bank.
Romania is making recovery efforts after the increase of VAT and salary cuts extended the 2009 and 2010 decline, while inflation reached the highest levels in the last two years.
“Economic growth will remain low in the next period while Romania will need several years to recover the lost production but the country will be in a more balanced development trend”, Deutsche Bank showed.
According to the bank analysts a depreciation of the leu is preferable, to compensate the inflation impact on the real exchange rate, especially considering the drop of demand for exports at world level.Deutsche Bank anticipates that Romania’s economy will drop by 1.9% this year and will increase by 1.5% in 2011, according to IMF estimates.
Inflation will slow down by the end of the year to 7.6% from 7.9% in October and to 4.1% in 2011. BNR will maintain the monetary policy at the lowest record of 6.25% to stimulate domestic demand, analysts say considering that investors would sell insurance for the default of Romania’s five-year bonds and to buy insurance fo Hungary’s debts for which there are uncertainties concerning for which there are uncertainties concerning economic policy.
If the harsh program in Romania continues, the fiscal adjustment will probably be impressive. The 2.5 point adjustment of the 2011 structural demoting at a level not recommended for investments.
Moody’s Agency dropped Hungary’s rating to Baa3 because it fears that the government covers the budget deficit with unsustainable, temporary missions. Deutsche Bank considers that Romania can request a preventive accord from IMF after the contracted expires in May, as the country does not have any problems like financing incapacity in the international market, the need for an ample adjustment of structural policy, unsustainable or insolvent extensive bank debts.