Thus, the national currency is seen trading at 4.99 units against the euro in the first quarter of 2024 and at 4.70 units versus the US dollar.
“The recent fiscal and budgetary measures bring with them economic uncertainties and risks. The annual inflation rate is expected to rise at the beginning of this year, influenced by the increase and introduction of taxes. All these domestic factors, combined with the overall state of the European economy and the conflict in Ukraine, affect the growth prospects and the Romanian currency. On the other hand, Romania’s national bank stands out in the region as the least tolerant to currency volatility and has not allowed a significant depreciation of the leu,” as per the analysis.
In 2024, currency volatility is set to make a comeback, affecting companies engaged in trade, regardless of their size, the analysis also shows.
“Even a small shift in exchange rates can significantly impact a business’s profit margin, influencing its competitiveness in international markets. In this unpredictable scenario, Romanian import-export companies should proactively address currency fluctuations. This involves regularly monitoring currency markets to stay informed about the latest trends and implementing a tailored currency risk management plan with the help of a risk management specialist,” says Alin Latu, Country Manager iBanFirst Romania.
Following the period of monetary policies tightening, analysts expect the cycle of interest rate cuts to begin in major developed economies. As central banks embark on this shift, iBanFirst foresees a return of volatility in the currency markets. There are concerns that Europe might be on the brink of a recession, triggered by slowing growth of its main economies, Germany and France. In contrast, the US economy is surpassing expectations, leading to the strengthening of the dollar and depreciation of the euro. Disinflation trend in the Eurozone: Encouragingly, inflation in the Eurozone is showing a more substantial decline than initially predicted. The European Central Bank (ECB) has adjusted its inflation projection for 2024, reducing it from 3.2% to 2.7%.