Bancherul - BANCI / ENGLISH / Cristian Popa, National Bank of Romania (BNR): The romanian leu is not overvalued

The current excange rate is not overvalued, the deputy governor of the National Bank of Romania (BNR), Cristian Popa (foto) said. He argued that there were at least four investment banks in whose estimates the rate was closest to the fair value, taking into account the national currency’s evolution in the past five years.

Representatives of the Romanian Businessmen’s Association (AOAR) stated, in early June, that the national currency was overvalued, a “normal rate” being, in their view, RON 4.7-4.8/EUR, and argued that the appreciation of the RON had negative effects on exports.

“The truth lies with the market. We will always have the rate that the market imposes. What the central bank intends to prevent is excessive volatility. At no point do we speak of rate levels or intervals. What we speak of is the need to avoid this volatility. Excessive volatility can affect forecasts,” Popa added.

As regards the downgrading of Greece’s rating by the Standard & Poor’s rating agency, Popa argued that the situation would not put a significant strain on the RON, although Romanian authorities remained concerned by the risk of contamination. Furthermore, the ratio of loans in CHF out of total loans is low and some of these have already been refinanced in EUR, so that the risk of a rise in underperforming loans remains low, Popa added. The present situation of those who took loans in CHF a couple of years ago is not to be envied, after the Swiss currency appreciated against the RON and EUR, according to Popa. Moving on to another topic, Popa further claimed that economic growth would amount close to the 1.5 pc-level forecasted, for this year, by the Government and the International Monetary Fund (IMF). Furthermore, he argued, risks of a poorer performance could result from exchanges with Northern European countries, particularly Germany, and from the debt crisis.

The deputy governor of BNR further argued that the reduction of the value added tax (VAT) on food products would affect only slightly the inflation rate, even if these products account for a large share of the consumption basket. Therefore, the measure does not seem sustainable from a fiscal point of view, at least in the short run.

The central bank official argues that gross fixed capital formation (investments) will contribute to steadier economic growth and will become the third factor backing recovery, after exports and the industry.

Greek banks in Romania are not faced with problems

At the same time, Greek banks have a solid situation and a sufficient amount of collateral to withstand a prolonged crisis in Greece, which makes them appealing for the investors, but, for the time being, there are no signs indicating that parent-banks are considering pulling out of Romania, Popa said on Friday. As regards amounts sent back home by Romanian citizens working in the UK, Popa argues that the central bank has no disaggregated figures as yet. The statement came in the wake of the “Daily Mail”’s publishing, on Friday, information regarding the earnings of Romanian citizens working in the UK. Thus, according to the “Daily Mail”, Romanian workers sent nearly GBP 500,000 (EUR 563,000) back home on a daily basis, in the first three months of the preceding year.