Banks expect as much as 4.7 RON/euro

Romanian banks expect peaks as high as 4.5-4.7 RON/euro in autumn, after the official exchange rate hit a new all-time high on Tuesday, at 4.29 RON. The latest analysts’ forecasts are much more pessimistic than at the end of last year, when no one dared anticipate that the all-time high reached in 2004 would be exceeded. However, the market saw the euro go beyond this level, reaching as much as 4.36 RON on the interbank market yesterday, thus setting a new record. In mid-day, the euro declined to 4.27 RON. The most pessimistic scenario comes from ING Bank analysts, who think the euro will reach 4.7 RON in the third quarter of the year. This comes in the context where foreign investors will sanction last year’s explosive budget deficit, which reached 5%, and amid insufficient correction measures taken so far. “The NBR (National Bank of Romania i.e.) is allowing the RON to weaken, targeting a correction of the foreign deficit,” says Alexandru-Chidesciuc, chief-economist of ING. “The generalised opinion on the unprecedented deterioration of conditions on the international market in the first half of the year leads us to believe the 4.5 RON/euro exchange rate could be reached in the next few months, while the depreciation of the RON is expected to reverse in the second half of the year,” says Florian Libocor, BRD-SocGen’s chief economist.