"Nobody thought the ROL depreciation trend was going to be reversed. Not even the NBR. We believe the inertia couldn't have been broken by anything other than a mild shock," said Mugur Isarescu, the NBR Governor, one day after the surprise intervention by the central bank on the foreign exchange market in which it bought euros, pushing up rates by no less than 10%.
The shock only added to the confusion caused by a month of decline in euro and dollar exchange rates, though it did indicate where this decline was supposed to stop. This was NBR's preferred way of shaking up a market that refused to accept anything other than an increase.
"The new developments will undoubtedly have their casualties," Isarescu warned.
But what do the "casualties" have to say about this?
"NBR is sending out a false message. It is the SMEs that will be affected worst. I was surprised to see Mr. Vasilescu say imports would get cheaper and this would have a positive impact on most people. This is untrue, because importers will not cut prices in ROL, and energy, which is the most important raw material, will not get cheaper - quite to the contrary: new price increases have been announced," said Maria Grapini, chairperson of the Light Industry Employers Association (FEPAIUS) and the Pasmatex Group. Grapini estimates that exports sank by 150 million euros last month due to the appreciation of the ROL against the euro.
"The National Council of Exporters, which was established this year and which we hoped would help us, has turned out to be a rather formal organisation. After NBR representatives said they could not attend the meetings, we can only gather that no concerted policies are being applied," added Grapini.
The confusion created among banking clients is reflected in the opinions of business representatives.
"The worst thing is that people are losing confidence in investments and in getting involved in new projects, and some employees are losing job security. I am convinced this is an artificial rate and that NBR should take some measures in the circumstances," said Dan Egri, general manager of Targu Mures furniture manufacturer Mobex. His factory currently employs 1,600 people and exports more than half of its total production. "The ROL appreciation is hurting Romanian exports. Some smaller furniture factories in Bucharest have halted operations and put people on leave because they could no longer afford to operate at a loss," explained Egri.
The NBR Governor claims the ROL's appreciation is "far from being too strong." Why this?
"Were we to make a comparison, not between the exchange rates on a given date, but between average values in the reference years, we would notice that the average ROL/EUR exchange rate was 8.4% lower in the first 11 months of this year than the 2003 average. It is the right thing to do to note not only how much the ROL gained early in December 2004 against December 31, 2003, but also how much the ROL lost in December 2003 against December 2002. This last figure is 17.7%. Thus the ROL depreciated in real terms in 2003, making up for this loss in 2004," Isarescu explained.
Unfortunately, calculations of this kind using average exchange rates are not within most people's understanding and thus only help to fuel the confusion. razvan.voican@zf.ro
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