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October 20, 2020
BUSINESS

The national currency depreciation was reasonable, says BNR Governor

RON depreciation that has lately taken place was a ‘reasonable’ one considering the internal political strains but the decrease surpasses the economic developments, even if Romania has a rather high current account deficit, as Mugur Isarescu, BNR Governor, said yesterday. “RON remained reasonable. It has gone through so many, poor it, who can say it did not? Namely only 2-3-4 percentage points against an amount of terrible things said. (…) The depreciation has been unreasonable since the beginning against the economic foundations. We believe that the foundations are not deterred. For 2-3 years we had an inflation rate over the European average. One should have expected a certain deterioration considering the foundations. But the inflation differential between us and the rest of the world, between us and Europe, it was only a few percentage points. And it almost reversed this year which should have helped RON,” Isarescu said, Mediafax said.He also underlined that the rate started to be mainly influenced by other factors as well, external factors, internal strains, uncertainty and others. “Thus, as of point X not known by you or by me, up to this point, I told you that it is about 2-3 percentage points. These 2-3-4 percentages are extremely reasonable considering our attitude,” Isarescu added.Yet, according to HotNews, he warned: “Do not worsen things more for the national currency! A difficult time period for RON is expected. Markets are nervous and they have grown pessimist since April regarding RON evolution.”He also admitted that Romania experiences a legal issue related to the fact that unlike Poland or even Hungary, it experiences a high current account deficit which even if its not 14 per cent of GDP any longer, it is around 4-5 per cent and it needs to be financed. The BNR official explained that when this is not financed and there is no national or institutional capacity to absorb EU funds for financing, as IMF economic forecast programme was designed, there is a funding gap, which becomes critical.Mugur Isarescu also indicated that RON decoupling from the regional trend started in April – May. “The factors have been explained before. It is about the stronger relation that Romania has with the Balkans area, both physically and psychically and also with the crisis in Greece. Something that triggered capital outflows and at psychical level, it resulted in a more unfavorable vision also related to Romania and to the banking system in Romania as well as RON evolution, a vision shared by international markets,” BNR head concluded.One should notice that the national currency appreciated strongly yesterday in the first part of the inter-banking session following BNR indirect intervention, according to dealers, so that EUR reference rate decreased by RON 0.0741 to RON 4.5740 per EUR following a record level hit on Friday. A possible consequence of the strong rate drop could be the limitation by BNR of the amounts granted to banks through REPO operations, up to RON 6 bln, according to a dealer, cited by bursa.ro. The cited source indicates that this is a modality to control the rate. EUR may also have dropped because USL announced changing heads of several Ministries.In case of USD, the reference rate decreased from RON 3.7972 per USD and CHF rate dropped to RON 3.8695 per CHF.

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