fbpx Modifica setari cookieuri


Surprise in budget implementation for first 4 months: revenues in April were on the rise. Budget deficit – reached 2.5% of GDP

The general consolidated budget registered for the first four months of the current year a deficit of almost RON27 billion, equivalent to 2.48% of GDP… Mai mult

The Monkey in its Labyrinth

Covid is a curse which helps the Romanian economy: it opens no new roads for us but closes the old ones and forces us to… Mai mult

Industrial production decreases for the 8th month in a row. -3.1% in January

According to the data communicated by the NIS, in January 2020, Romania registered a new decrease in monthly industrial production, by -2.4% in gross series… Mai mult

VIDEO / Spring, first Dacia electric model, enters series production as of 2021

Dacia-Renault presented its “show car” Dacia Spring, “which prefigures the first 100% electric model of this brand” and will enter series production in 2021, according… Mai mult

Analysis / 2020 – turning point for economic balance: Political decision will choose whether or not we shall sustainably develop

With current data and based on the legislation already adopted, Romania’s public debt is forecasted to reach 91.2% of GDP, according to the analysis of… Mai mult

Pressure that trade balance puts on exchange course. Moving focus on exports – essential

de Marin Pana , 15.1.2018

The average euro/leu exchange rate registered in 2017 the highest increase in the last five years, and the rate at the end of the year had the most consistent advance in the last eight years, according to official data.

However, the levels of 1.72% and 2.61%, respectively, are relatively low compared to the international practice, where fluctuations within the Euro-dollar-pound trio are much more important.

The difference is that those economies are stronger and allow for higher fluctuations in exchange rates, while the Romanian economy is much less robust and expectations regarding the local currency’s stability are much higher, precisely because in most of the nine years between 2009 and 2017, variations were quite minor, up to one percent or slightly above.

As a matter of fact, Romania would have passed the test of the ERM II mechanism, which precedes the euro adoption, in terms of exchange rate fluctuations, imposed within the range of +/- 15% on this criterion (for reference let us remember that Slovaks did not fall exactly within the range at the 2009 accession and a change in the central parity was needed at the last minute).

It should be noted that, even in the peak crisis, when GDP fell by more than seven percent and the exchange rate was re-set to the limit that would have been imposed by ERM II, the year-end change has been limited to slightly more than six percent. Which at that moment represented in itself a success that had gone unnoticed if it would not have been criticized by those who were hoping for a chaos in the currency market.

Back to our theme, the decision to accelerate exports, the field that brought us out of the economic crisis has been reversed as soon as we saw ourselves out of the problems. We can see that if we observe both the import coverage ratio by the exports (FOB/FOB values, namely the most favourable ones) and the evolution of the exchange rate – see the table.


  • Evolution of euro/leu exchange rate (2009-2017)
  • Year    average           change            year-end          change            export/import coverage ratio


It can be easily deduced the importance of a reasonably high coverage ratio (at least 90%) for the capacity to pay for imports of goods with money obtained from the export of goods. Not that it would not have been worthwhile to go even higher, to 100%, to reduce dependence on foreign investment that come to fill the gap created and balance the currency market, along with the surplus in services.

It is certain that the increasingly clearer shifting toward almost exclusively domestic consumption (foreign trade has come to negatively affect GDP) could not affect the exchange rate more clearly. Modified from 4.49 lei/euro, the initial average level planned and used for the 2017 budget to 4.56 lei/euro, near reached (without any rounding).

And this in the context in which the trend does not look good at all, if we look at the gap between the starting value in 2017, the annual average and the value reached when the year ended. With an average placed at less than a quarter, as a position in the increase range versus the starting level and more than three quarters compared to the final level.

It is important to note that in the analysed period it is only the second year when the average value is between the starting and the final value (after 2012, which looks similar to 2017 both in terms of the exchange rate evolution over the year and the coverage ratio). Which could be bad but also good, if we would somehow manage to rebalance the growth with the focus on exports and bring the average value of the exchange rate back BELOW the levels registered at the beginning of the year and at the end of the year, as in all other years presented.

All in all, previous data, based on a long practice, shows that a slow, orderly, calm and limited retreat on positions that can be rationally supported is optimal. The decrease in the average euro/leu exchange rate from almost 4.57 lei/euro, the average level for 2017, to 4.55 lei/euro (included in the 2018 budget law) appears rather hazardous, given the start from the level of 4.66 lei/euro, even if we admit the happy case of the average below the limits of the interval.

The inflation differential is increasingly clearer between us and the Eurozone and leaves little operating room. But an appreciation in real terms of the Romanian leu (desirable in principle, but in disagreement with the fiscal-budgetary measures) in the context of an expanding trade deficit makes no sense, it would only further affect the external competitiveness. The maximum attention would be towards reversing the decrease tendency in the coverage ratio to at least the critical threshold of 90%.

Of course, the variation of the national currency will also be in the way of a nominal drop of the exchange rate and the central bank will try to mitigate the speculative exuberance. The currency regime we chosen is a controlled floatation, but it can neither be transformed into a sort of floating control, because the market is a market. And at the end of the day you can only admit, with higher or lower costs, possibly supplemented by professionalism, the harsh reality of the economic fundamentals and free transactions.

Mergeți în homepage ›

Publicat la data de 15.1.2018

Lăsați un comentariu


Renault holds expansion of its plant in Romania, 15,000 jobs cancelled at global level

"Putting capacity growth projects planned in Morocco and Romania on hold" - is one of the measures included in the draft plan of Renault Group… Mai mult

Romania is a net importer of electricity in 2020 as well

Romania imported an amount of electricity of almost 796 GWh in the first month of this year, by more than 36% above what it exported… Mai mult

Shareholders of Galati steel plant promise investments of one billion euros

GFG Alliance has committed to invest one billion euros to upgrade Galati steel plant in order to reduce emissions and increase production. Another EUR 1… Mai mult

Transport Ministry announces it has sent to Brussels the financing request for Sibiu - Pitesti highway

The Transport Ministry, as the Intermediate Body in Transport, approved the financing request for the project "Construction of Sibiu - Pitesti highway", Sections 1, 4… Mai mult

Romania and Juncker Plan: EUR 720 million attracted, of which 35% by Transgaz for BRUA

(The map of investment financed through Juncker Plan, by GDP share. Darker colours mean higher shares) The operator of national natural gas pipelines, Transgaz (TGN)… Mai mult

Top 3 reasons why young people leave Romania

Lack of trust in authorities, corruption and low living standards are the main reasons why young people leave Romania. The data is part of a… Mai mult

IMM Invest Romania – program implementing rules have been published

The Ministry of Public Finance announces that it has issued the methodological norms for the implementation of the Program for supporting small and medium-sized enterprises… Mai mult

Pollution import and car park expansion: comparisons with the other EU states

Romania is the EU country with the fewest cars in terms of the number of inhabitants, according to data recently published by Eurostat. We appear… Mai mult

Government is trying to save budget deficit: reductions in public administration system, cancellation of bonus for harmful conditions, excise duty on soft drinks

The Government is preparing the public for the first measures aimed at avoiding the budget slippage, which would be applied by the PSD-ALDE government. News… Mai mult

Laura Codruta Kovesi remains alone in the race for European Chief Prosecutor

French Prosecutor Jean-Francois Bohnert will be appointed as head of the European Financial Prosecutor's Office, a position for which he was heard on Thursday, 11… Mai mult

Romania - EU country with highest risk of dying in a road accident, Bulgaria is quickly decreasing number of victims since it built motorways

Romania recorded the highest road deaths in the EU also last year, with 96 deaths per one million inhabitants in 2018, almost double the EU… Mai mult

Latest developments in progress at Health Ministry: Differentiated wages based on performance, competitions organised at a regional level not by hospitals

Sorina Pintea announced on Thursday further new changes that will be brought to the functioning of the health care system, including new rules for employment… Mai mult

ANAF changes selection procedure for liquidators. Main changes

The new order on approval and selection procedures for insolvency practitioners is an important step to a very good direction, industry experts say. ANAF is… Mai mult

Romania loses competition for a seat at UN Security Council. MAE Excuse: Campaign started too late

Romania lost to Estonia in the final vote to get the non-permanent member position within the UN Security Council for the period 2020-2021. On Friday,… Mai mult

Business internationalization / eMAG makes a step to entry five new international markets and targets a business of EUR 2 billion

eMAG hopes to get the opinion of the Hungarian Competition Council over the next two months for the acquisition of Extreme Digital, the market leader… Mai mult