Latest economic data on industry, retail sales and constructions confirms one more time our expectations of economic contraction in Q1 2012. The hard winter as well as the euro-zone weak economic developments contributed in this direction. Credit activity resumed in March only on leu denominated corporate lending. Inflation continued to decline in April, expected to reach the bottom level in the next two months. Although from inflation perspective there would be additional room for cutting, the internal and external risks are putting central bank is a wait and see mode - more clarity being Dit e-mailadres wordt beveiligd tegen spambots. JavaScript dient ingeschakeld te zijn om het te bekijken.
In April the government successfully tested the market’s appetite for longer term papers and the yields maintained on a declining path – yet this trend is expected to stop and possible to reverse in the short run as the central bank stopped the rate cut cycle after the government fall. In light of the recent events the EUR-RON crossed the level of 4.40. The fiscal uncertainty Romania is facing now (with a new government that could pursue a policy that might induce fiscal slippages), along with political and deleveraging issues in Europe and having in mind also the EUR-RON behaviour since October last year – all these are creating expectations that the pressures on leu might persist.
Catalina Molnar - Senior Economist - RBS Bank (Romania) S.A.
