“A weaker exchange rate usually leads to increased competitiveness and hence to increased economic growth. However, you must have extra production capabilities or quick investments in sectors such as the agriculture, when a surplus of 10% makes all the difference because you can export it. But this is not the case in Romania,” Isarescu told a round table discussion organized by the central bank.
Romania’s leu lost around 2% against the euro on the interbank market since the middle of last week, amid political tensions that ended in the President’s suspension by parliament. Since January, the national currency weakened by 4.7% versus the euro.
The weaker leu could give domestic producers a chance to step up production and reclaim the local market by “killing imports”, but they need investments to increase their production capabilities first, Isarescu said.
Moreover, Romanian exporters are equally unsatisfied with the leu’s depreciation and would rather have a stable exchange rate, the central bank’s chief said.
Isarescu said the central bank has stepped into the money market and sold euros to prevent the leu from depreciating too much.
“We had a strict rule; we’ve only sold in the market the money sold to us by the Finance Ministry, which has been attracting funds from foreign markets lately,” he said.
According to market participants, the central bank’s interventions last week have been less aggressive compared to other times when the leu lost ground against the euro.