Political class causes trouble for the RON again

Romania’s political risk has become of topical interest for analysts once again, after the euro has already climbed to nearly 4.3 RON on the forex market, the highest level of the past two months, following the replacement of six ministers last week that failed to quell talks on the dismissal of the current government.

Disputes on the political scene overlap with a new deterioration in players’ sentiment regarding the international situation, and come at a time when fears of a slowdown of the major economies and of a potential deepening of problems for heavily indebted European countries have been rekindled.
“If financial stability is the prime concern (of the NBR – National Bank of Romania), it should keep the exchange rate as stable as possible, because a depreciation would put significant pressure on repaying foreign currency-denominated loans. If you want to find a way to stimulate the economy using monetary tools, you can either come up with extremely lax policies as far as interests are concerned, or use the exchange rate to encourage exports to a certain extent. Things are very complicated, however, because the political picture is a moving one, and in the fiscal department it is not clear enough whether the VAT adjustment will have real effects on budget revenues,” says Dorin Badea, head of the UniCredit Țiriac Bank treasury.