Lucian Anghel: Observing the IMF arrangement will not devaluate the leu to more than 4.3 to units to the euro

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Romania’s national currency, the leu (RON), will not go down to more than 4.3 units to the euro this year if Romania keeps within the limits of the arrangement with the International Monetary Fund (IMF), Banca Comerciala Romana (BCR) Chief Economist Lucian Anghel said on Tuesday.

‘We are expecting the exchange rate to be RON 4.3 to the euro late this year. Under normal circumstances, if the conditions in the IMF arrangement are met, the local currency should not record massive depreciation this year,’ said Anghel.

Unlike other countries faced with marked declines in inflation, Romania is still faced with persistent inflationary pressures. The depreciation of the exchange rate since early this year, coupled with negative developments in some administered prices, and particularly limited supply of goods and services is the main risk factor in the case of inflation, Anghel explained.

The BCR chief economist believes that inflation remains a difficult issue for Romania, particularly when the indicators are considered against the Maastricht criteria and the switchover to the single European currency remains tightly connected to inflation developments.
‘If Romania is to switch over to the single European currency, we have to have a certain sustainability of inflation. Inflation remains hard to achieve when seen against the Maastricht criteria.

Without a strong agricultural sector the fight against inflation will be hard to fight, particularly with the current agri-food prices,’ said Anghel.
He mentioned a macroeconomic study indicating that Romania will record negative growth of nearly 1.2 percent in 2009 as a result of a considerable contraction of external demand and the lack of consistent support from specific internal factors for economic growth.

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