The favorable result for extremist presidential candidate George Simion prompted investors to exit numerous positions, inflaming the exchange rate and interest rates.
The exchange rate climbed on Tuesday towards the threshold of 5.1 lei/euro, and this depreciation will be seen in higher prices for various products and services, interest rates have increased and are likely to remain high, which makes investors and the business environment have some legitimate concerns, the executive director of the Concordia Employers’ Confederation, Radu Burnete, told Agerpres.
“After a long period of exchange rate stability (1-2 years), today we have seen a rapid increase towards the 5.1 leu/euro threshold, amid increasing pressures on the foreign exchange market. The Central Bank has made efforts and intervened in recent times to defend the exchange rate, but this could not be done indefinitely. The depreciation of the leu will be seen in higher prices for various products and services (telephony, gas, gasoline, etc.), which means higher inflation. However, Romanian products will become more competitive in exports, which could help reduce the trade deficit and balance Romania’s external situation,” Burnete explained.
The National Bank of Romania (BNR) has been drawing liquidity from the market after capital inflows decreased and outflows increased significantly, which led to an increase in interest rates, BNR spokesperson Dan Suciu also stated.
“Recently, there has been an important change in the foreign exchange market. Capital inflows have decreased, and outflows have increased significantly. Consequently, in order to temper these movements, liquidity had to be attracted from the market and interest rates have increased. The NBR will seek an optimum for this situation,” explained Dan Suciu.
Interest rates could remain at a high level, given the state’s need for financing.
“In all this uncertainty, interest rates have increased and are likely to remain at a high level, also taking into account the state’s urgent need for financing, in the context of a very high deficit. The moment is a sensitive one, and investors and the business environment have some legitimate concerns,” pointed out Radu Burnete.
According to NBR data, the euro was quoted on Tuesday at 5.0378 lei, up 6.03 bani (1.21%) compared to the previous quotation, of 4.9775 lei, registering a historical high.
The three-month ROBOR index, based on which the cost of consumer loans in lei with variable interest is calculated, rose to 6.08% per annum, from 5.90% per annum in the previous meeting.
