The RON remains undervalued against the main currencies, although the gap has narrowed to a certain extent in recent years, especially after the almost 12% nominal appreciation in 2005, several analyses of the IMF experts conclude.
The Fund believes the RON could be expected to appreciate in real terms, as living standards in Romania get closer to those in the EU and substantial inflows of foreign capital are registered.
As for the chances of exporters surviving this process, the IMF says this will depend on their capacity to improve productivity, on NBR''s capability to control inflationary pressures and on the speed at which the appreciation of the RON in real terms proceeds.
The RON appreciated by 5.3% in nominal terms in the first four months of this year compared to December 2005, while inflation stood at 1.91%.
A first set of calculations based on the purchasing power parity, which entails relating to an exchange rate of two currencies where the same product purchased in different countries has the same price in the same currency and indices like Big Mac, which ties the Romanian price of a BigMac to an American BigMac, suggest the RON is actually undervalued by no less than 24-47% in real terms. The IMF survey, however, takes the result with a grain of salt, as it would entail a continued appreciation of the Romanian currency until it reaches 2.5 RON/EUR.
A more complex analysis that uses data from 85 countries and captures the development and productivity gaps, leads to the same conclusion, though: the RON is still undervalued, even if considering the income and productivity differences.
The authors of the survey also take into account that the currencies of most countries in transition appear as undervalued when related to the international currencies.
The same result is arrived at when making an analysis based on salary comparison, which, according to the IMF, suggests that the economies of the countries in transition have certain peculiarities that tend to keep prices below international standards.
"Some of (this) undervaluation could show a structural imbalance, which will come out only slowly, as time goes by," the Fund experts believe.
At the same time, the comparison with countries with a similarly low income, as those in the Commonwealth of Independent States lends itself to an interpretation that the RON is actually too strong for the transition phase Romania is currently in.
In such case, Romania could have a competitiveness problem compared with its neighbours, and is in need of substantial productivity improvement.
Overall, though, IMF''s assessments lead to the idea that the RON is undervalued in real terms, albeit the cost advantage Romania had has eroded greatly over the last two years.
IMF says that it was not the appreciation of the exchange rate that affected exports and Romania''s competitiveness abroad, but the fast-paced increase in wages along with smaller and smaller productivity gains.
razvan.voican@zf.ro
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