2004 has been the best year for the Romanian economy. Economic growth is poised to reach 8%, beyond early year forecasts. Exports have hit a record high, closely following imports.
Inflation has for the first time descended below the level of 10%. The National Bank of Romania has cut the benchmark rate by 4.25 percentage points. The important factor, however, has been the underlying trend: one of gradual descent, not as it happened in 2003, when the sudden drop posted at the beginning of the year was followed by rapid growth in the second half. Monetary policy has been more coherent. And the Finance Ministry has gradually reduced interest rates.
Paradoxically, given the budgetary surplus, the Finance Ministry no longer needed to borrow so much during the second half of the year. This has however angered the banks and the major players on the monetary market, which no longer had a target for their funds.
The biggest surprise, however, has been the appreciation of the domestic currency. The question asked by the National Bank Governor Mugur Isarescu this summer, namely "What is going to happen should the euro drop to 36,000 ROL?", had many people start wondering. In December, the euro reached almost 36,000 ROL after having oscillated between 41,000 and 42,000 ROL early in the year.
The euro's drop has made it easier for those that had contracted loans in the single European currency. The same happened with those who had borrowed in dollars, as the US currency has lost 11% against the ROL.
Over 70% of the loans granted on the Romanian market are euro or dollar-denominated.
At the opposite pole, the two foreign currencies' decline has eroded the wealth of exporters. They were urged by Mugur Isarescu to cover this gap by increasing domestic competitiveness. The stability of the domestic currency and high interests in ROL have lured in the big speculators who have found the Romanian market to be a good investment option.
The biggest foreign banks have invested on the Romanian monetary market.
NBR vice-governor Cristian Popa stated that almost one billion euros had been placed in government bonds and banking deposits, with this sum expected to reach 2 billion euros in 2005. At the same time, NBR is trying to take ROL interests lower as soon as possible, before the full deregulation of the capital account, expected to take place in the first half of next year.
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