Bancherul - BANCI / ENGLISH / BCR Research keeps the forecast regarding an EUR/RON FX rate of 4.22 in December

The Executive Board of the IMF completed the fourth review of Romania’s economic performance under the 24-month stand-by arrangement. At the beginning of this week the central bank will receive EUR 0.9bn. This will consolidate its FX reserves which are already at a very comfortable level (EUR 31.6bn, the equivalent of ten months of imports of goods and services).

The IMF acknowledges the ambitious fiscal consolidation program currently followed by the Romanian government. Balancing the fiscal adjustment between expenditure cuts and tax increases will help cushion the social impact, while at the same time reversing excessive past increases in public wages.

The press release issued by the Fund includes an interesting statement regarding the monetary policy stance. The IMF considers that there is some room for further monetary easing going forward, despite the uncertainties related to the inflationary impact of the VAT increase and regional developments. In our opinion this means the central bank could cut the minimum reserve requirements in the next quarters to support lending to the private sector.

Implications: the disbursement of the next tranche from the IMF is positive news for the FX and fixed income market. We maintain our forecast regarding an EURRON FX rate of 4.22 in December.