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Erste Report: Leu may depreciate by another 5%

The leu might depreciate by another 5% against the euro, after growing by 11% in 2008 considering the huge current account deficit."Foreign exchanges from Central and Eastern Europe had varied performances of late but their volatility was equal.

The most promising currency seems to be the Polish zloty. On the opposite side of the analysis is the leu which may lose another 5% against the euro, taking into account the huge current account deficit," the Erste report shows.As for the current account deficit, experts estimate it was around 13.6% of GDP in 2008 but will drop to 12% of GDP this year and to 9.8% in 2010.Analysts of the Austrian bank consider that the international investors' skepticism for the region will slowly improve and the global environment will be uncertain, but mentions that each state should be analysed individually."As we have repeatedly mentioned, the macroeconomic situation is different from state to state. However, a common denominator is the reduced debt level. The debts of households in the area vary between 20% and 40% of GDP, while in Europe they are 60% and in the US about 100%, Erste experts say.Analysts mention the "burden" of debts but it seems it is easier to administer them in the area than in advanced economies, in the context in which the growth rate of the credit sector was obviously exaggerate in some states. "Indubitably Romania and Hungary hold a significant share of foreign exchange loans, but the Hungarian currency depreciated by 14% against the Swiss franc and the leu dropped by 11% compared to euro at the beginning of 2008.

The growth rate of the nominal salary covered in Hungary most of the depreciation and was double the one in Romania," Erste Group specialists consider. Representatives of the Austrian bank estimate that Romania registered in 2008 and economic growth of 7.6% the advance being limited to 4% this year and will reach 5.4% in 2010.They consider that the budget deficit has the largest potential to register a positive surprise this year, compared to their own estimates."A positive surprise in Romania could be a more coherent fiscal policy, especially in a difficult year, and the deficit of the consolidated budget could drop under 3% of GDP. That thing will be made by significant reductions of public expense at the same time with increasing focus on capital investments mainly in infrastructure projects and a reduced profile of wealth expenses," Dumitru Dulgheru, BCR analyst said.Estimates about budget deficit are 3.2% of GDP in 2008, 4% in 2010 and 3.3% in 2011.

 

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Tags: deficit erste another bcr euro

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