Mugur Isarescu promises stabler euro, livelier dollar

Euro will be more stable on the forex market in Bucharest this year following its 16.8 percent leap in 2003, as the depreciation of the ROL against the single currency should not exceed 10 percent, while the volatility reverberating from the foreign market will affect the ROL/USD exchange rate this time, Mugur Isarescu, National Bank of Romania (NBR) Governor on Tuesday said.

The ROL last year appreciated in real terms against a currency basket of which the euro accounted for 60 percent, but depreciated against the European currency in real terms, in contrast to the EU convergence goal. Isarescu says the increase in euro’s share in the basket to 75 percent (the dollar will be left with only 25 percent) will also come with a reversal of last year’s trends so that the heavier fluctuations will occur in the ROL/USD exchange rate’s case and the ROL/EUR rate will be free of instability.

Actually, the market has seen more and more significant moves of the ROL/USD rates in response to the moves of the foreign market, which no longer translate exactly in ROL/EUR exchange rate changes as in 2003.

The NBR Governor said during a conference on EU accession organised by the Bucharest Business Week that the real appreciation of the ROL was essential for supporting the downward trend of the inflation, based on the stability of the ROL/EUR exchange rate. “The appreciation must also continue after the accession for another 10-15 years so that Romania could catch up with EU.”

The average inflationary rate last year fell to 15.3 percent from 22.5 percent in the previous year. “The inflation that is still high makes it hard for us to talk about longer-term interests on the Romanian market,” Isarescu stated. The Governor says a raise in wages above the productivity dynamic and a possible increase in the quasi-fiscal deficit are the main factors that could create trouble in attaining the 2004 inflationary rate set at 9 percent calculated December to December.

“Any delay in the structural reforms brings along additional inflationary pressures. The reform measures cannot be perfectly substituted with monetary policies,” Mugur Isarescu specified.
razvan.voican@zf.ro