BCR sees low exchange rate volatility in 2009

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The euro-leu exchange rate might keep relatively stable until the end of the year, on the background of the agreement secured by Romania with the IMF and the European Commission, Banca Comerciala Romana (BCR) chief-economist Lucian Anghel said on Friday, presenting a macroeconomic analysis conducted by the said financial institution.

„We see the exchange rate keeping relatively stable, at least until November.

The local currency, the leu, could display one of the lowest volatilities compared to previous years. It is very important that we managed to avoid massive depreciation other currencies in the region, like the forint and zloty, have seen at the beginning of this year,” said Lucian Anghel.

BCR estimates for 2009 an average exchange rate of 4.2 lei for one euro, 4.1 lei for one euro for 2010 and 4.0 lei for one euro in 2011.

According to the BCR study, the National Bank of Romania (BNR) will hit the inflation target set for 2009; BCR predicts an inflation level of 4.4 percent at year-end, close to BNR projection of 4.3 percent.

For 2010, BCR analysts foresee a year-end inflation of 3.1 percent, inside BNR’s target range of 3.5 percent plus/minus one percentage point.

BCR estimates that the BNR will continue cutting back the key interest rate to 7.5 percent at the end of 2009, and 6 percent by December 31, 2010.

BCR analysts believe that Romania’s current account deficit could narrow to 5.1 percent of the GDP in 2009 from 12.3 percent of GDP in 2008, and this downwards correction should continue to 4.5 percent of GDP in 2011.

Anghel also said that the public sector restructuring has an important role in attracting direct foreign investments. BCR estimates that in 2009 foreign direct investments in Romania will drop to 5 billion euros, representing 4.2 percent of GDP.

Last year, foreign direct investments in Romania have exceeded 9 billion euros, the equivalent of 6.6 percent of GDP.

BCR estimations for 2010 point to foreign direct investments of 5.5 billion euros, which will keep on rising to 6 billion euros in 2011.

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