Developments in the Romanian economy are worrying, including in terms of the exchange rate of the local currency leu, according to the transcript of central bank’s latest meeting.
Budget execution and the economy growth beyond its potential, as well as a certain boost to private investment, have an impact on the current account imbalance.
The higher trade deficit and the deterioration of the primary income balance led to almost a tripling of the current account deficit in the second quarter compared to the previous one. In July, the negative balance of goods and services reached the peak of the past 19 months.
The short-term risks also stem from a relative slowdown in the real disposable income of the population because of the increased excise duty on fuel and higher utilities prices, according to the central bank.
Romania’s National Bank recently decided to maintain its monetary policy rate at 1.75% per year despite higher inflationary pressure. BNR has also pumped liquidity into the banking market to stop the fast rise in inter-bank interest rates.
The interest rate at which banks lend to each other in Romania, ROBOR, which is a benchmark for local currency loans, has increased significantly since the beginning of September. The 3-month ROBOR (ROBOR 3M) almost doubled from 0.9% to 1.78%. Yesterday, BNR lend local banks another RON 4.1 billion (EUR 900 million) via a 7-day repo operation at 1.75% per year.