The analysts of Citi financial group took the forex market by surprise yesterday, when they announced they saw the euro gradually go down towards 3.95 RON at the end of the year, while most local banks keep negative scenarios, which have the exchange rate go beyond the current levels by December.
The appreciation of the RON over the last few weeks, towards 4.15 RON/EUR levels, made it easier for those with loans in foreign currency to pay their instalments. An increase of the euro beyond 4.3 RON in the autumn would hurt them again.
More than 4.4 million Romanians have loans taken from banks, and almost 60% of the loans are in foreign currency.
The prospects are much better for those that took out loans in RON, because analysts see interests go down.
The analysts of Citi – who analyse the Romanian economy from Turkey, have adjusted their exchange rate projection for the second time in several months, considering the euro could go down to 4 RON in September and 3.95 in December. In April, they saw the exchange rate at 4.12 RON for one euro in December, thus adjusting the previous forecast of 4.2 RON/EUR. NBR calculated a 4.1529 RON/EUR exchange rate yesterday, slightly up from the previous day.
"In our view, the IMF is comfortable with the NBR’s active involvement in the forex market to contain excess volatility. This, coupled with the presence of a more credible macroeconomic framework supported by a sizeable IMF-EU-led financial package, should support the RON, barring a marked deterioration in global risk appetite," writes Ilker Domak, Citi’s regional head of economics for Turkey and South-Eastern Europe. Moreover, the ongoing strong external adjustment is another important RON-supportive development, he adds, though risks may arise from failure to apply the provisions of the agreement with the IMF.
Local analysts remain pessimistic and believe the RON will suffer in the second half of the year, because the benefits generated by the foreign financing ensured by the agreement with the IMF will be dwarfed by the negative news of the real economy. As a result, Romanian analysts see the euro above the current levels in December, at 4.3-4.5 RON.
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