At the end of the first half of the year, the general consolidated budget registered a deficit of about RON 15 billion, an amount… Mai mult›
Between three and five million Romanians work and live abroad. The 2017 UN estimate, rated as optimistic by the World Bank’s Report on Diagnosis of… Mai mult›
In only one quarter: Incomes increased five times faster than GDP. For public sector employees, even faster
Data released by the INS for the first quarter of 2018 show that households’ living standards increased considerably compared to the same quarter of the… Mai mult›
It is the Administrative Code’s turn: little responsibility for local elected officials, higher power for asset disposing, privileges
The Chamber of Deputies votes the amendments to Romania’s Administrative Code on Monday, amendments that strengthen the political control over local administrations. It is expected… Mai mult›
The average gross wage announced by the INS for May 2018 was 4,512 lei, 0.4% lower than in the previous month. Net nominal average wage… Mai mult›
Romanian leu exchange rate and competitiveness – some comparative observations to neighbouring currencies
de Marin Pana , 29.1.2018
Romanian leu has depreciated against the euro in the past year by less than two percent, as an annual average, a similar value to the US dollar and much lower than the pound (the latter affected by the announcement regarding the exit from the EU).
Unlike the leu, the Hungarian forint and especially the Polish zloty appreciated last year compared to the European single currency. Apparently, the Poles had a superior evolution, but if we look more closely at the evolution in recent years, this is just about a recovery of the devaluation that was somehow higher in 2016 (more than four percent compared to just one percent in the case of the Romanian leu).
- Evolution of euro exchange rates against some national currencies (2014-2017)
Incidentally, the similarity between the leu and the zloty (both having the mention “new” added in the acronym and parities extremely close to each other, which in terms of retail prices makes us feel in Poland as home) was completely remarkable in 2014-2015, with the stability of the annual average euro exchange rate close to perfection.
If we look at the gains and losses of the dollar and pound, we can notice a much higher exchange rate stability in the Central European countries (where geographically we fit better than in the Balkans), with a floating exchange rate regime than in the big Western economies, less influenced by such fluctuations. Where the population does not even notice minor exchange rate variations, of one or two percent, which they consider normal.
In other words, from the perspective of the international practice, nothing special happened and there are no reasons for concerns for now. Although the gap is slightly bigger, there is no obvious difference compared to the previous three years, if we consider the difference, in terms of exchange rate, between the annual average and the end-of-year values, the latter being systematically more increased for seasonal reasons.
- Exchange rate at the end of the year
- Average exchange rate
Romania’s competitiveness and real effective exchange rate
Let us now see to what extent the evolution of the exchange rate has affected or not Romania’s international competitiveness through costs or prices, relative to the main rivals on the international markets.
This is technically done by the so-called real effective exchange rate (REER abbreviated).
The indicator calculated based on the internationally harmonized rules from 42 countries (28 EU members + 14 industrialized countries, from USA and Japan to China, Russia and Turkey) with double weights in terms of exports (to correctly reflect the whole and not to give too much attention to the competition in the domestic market), shows an insignificant loss in competitiveness for Romania last year, according to the latest data processed and published by Eurostat.
- Real Effective Exchange Rate – 42 partners (2010=100)
- Dec 2016 Nov 2017 Difference
- Eurozone 19
The technical interpretation is a deterioration in competitiveness along with the increase of the indicator and vice-versa, the value of 100 being set for 2010. The relative appreciation of the single currency has quite clearly affected the competitiveness of the Eurozone countries and a little more the value registered for the whole EU.
The change in the latter was similar to that in Poland (which also had the highest appreciation of the exchange rate against the euro), higher than in Hungary (whose forint appreciated three times less than the zloty) and much more than in Romania, which chose the option of the acceptable depreciation but maintained its competitiveness.
Of course, it may not be the best way to preserve competitiveness and we would have the sustainable options, somehow more efficient on mid and long-term, for investments in modernisation, improving the business environment or expanding the infrastructure. But, in the meantime, balances are a daily challenge and are maintained with the means that we have available.Unfortunately, by the channel of imported goods, all the more desirable in terms of price-to-value ratio the lower the euro exchange rate, and the one of the income growth rate that is double the GDP growth, the risk of the general price index inflation occurs.
Which makes the adjustment of the monetary policy difficult and sends us back to the economic fundamentals of the restraint in increasing wages and pensions, so as not to affect the competitiveness and not to weaken the national currency.
Lăsați un comentariu
The Ministry of Public Finance makes a "comparative analysis" of the Tax Code and the Tax Procedure Code with a view to applying a new… Mai mult›
Romania, Hungary and Slovenia are the member states that recorded the largest increase in the share of public sector employees in the total number of… Mai mult›
Fitch confirms Romania's rating at BBB- but warns: fiscal loosening is risky for macroeconomic stability
Fitch Ratings confirmed on Friday Romania's rating for long-term foreign and local currency debt at BBB-, with a stable outlook, but warned that fiscal loosening… Mai mult›
Finance Minister Eugen Teodorovici said at a press conference held in Bistrita that "a mechanism of this type is in progress”, a mechanism on tax… Mai mult›
AOAR - Economy against new Criminal Code: businessmen denounce excessive protection provided to officials who cause damages to economy
The Businessmen’s Association of Romania (AOAR) asks the ruling coalition to explain the mechanism by which, after changes introduced on Wednesday in the Criminal Code,… Mai mult›
Number of insolvencies increased by 12% in first five months. Suspended activities - plus 31%, dissolutions - plus 59%
The increase in the number of companies and PFAs in insolvency was 11.97% in the first five months of this year, compared to the same… Mai mult›
The investment needs in Romania's transport infrastructure exceed EUR 70 billion, while the available resources by 2030 are EUR 36 billion, according to the Transport… Mai mult›
Liviu Dragnea announces a dictatorship through ordinances: "Correct procedural approach through Parliament is wrong, from the law on investment fund to laws on the judiciary. We will be firmer and more radical"
"We decided to be much firmer and more radical. My way of having a correct procedural approach in the Parliament proved wrong. In the Parliament,… Mai mult›
Deputies adopted a draft law on Wednesday whereby entitlement to social assistance ceases when a job is refused. The decision, Agerpres announced, was taken with… Mai mult›
The National Agency for Employment (ANOFM) grants subsidies of RON 900/month to employers who employ graduates of educational institutions, with contracts of indefinite duration, within… Mai mult›
C.P. Tariceanu, before the heads of Senates from EU: The European Commission has encouraged the parallel state, in Romania it is like in the 50's
Calin Popescu Tariceanu (foto) delivered a very tough speech on Friday, in the Senate, addressed to the European Commission, which he accused of encouraging the… Mai mult›
The National Bank of Romania (BNR) sent to banks for consultation a draft amending Regulation 17/2012, which provides for a consistent lowering of the indebtedness… Mai mult›
Senators adopted on Wednesday the draft for amending the Code of Criminal Procedure, by 74 votes for to 28, against. The bill goes to the… Mai mult›
RBL: Workforce crisis is worse than economic crisis - 3.4 million Romanians have left the country in last 10 years
Migration is one of the most serious problems facing Romania at this time, along with the lack of infrastructure. However, the return of Romanians to… Mai mult›