Saxo: Romanian Leu To Slide To 4.84 Units/Euro If IMF Terms Not Met

Such a scenario, which premises Romania’s failure to meet IMF demands and zero interventions on the market from the central bank, has a probability of over 50%, Christian Blaabjerg, Chief Equity Strategist at Saxo, told reporters in Bucharest.

Blaabjerg, who attended a presentation of Saxo’s „Outlook” report for 2010, said the scenario depends very much on the political scene in Romania.

The IMF was Romania’s „last resort” and the country needs politicians with the „necessary will and determination” to implement the required measures, Blaabjerg said.

Saxo’s official estimated the leu could advance to 3.96 units per euro in the first month; three months later, the leu would fall to 4.1 units per euro and would continue to depreciate to as much as 4.84 units per euro at the end of the 12 months period.

Should the government meet the IMF’s requirements, the leu is bound to see a smaller depreciation, Blaabjerg said. However, the probability for this to happen is below 50%, he added.

As to Romania’s economy, Blaabjerg predicted a 0.5% growth in 2010. The annual inflation rate is seen at 4.3% at the end of December, while the current account gap is estimated at 5.6% of the gross domestic product.

Romania and the IMF have signed a EUR13 billion standby arrangement last spring, as part of a larger EUR20 billion package which includes funds from the EU, the World Bank and other international lenders.

The deal did come with several strings attached, including austere measures Romania must implement to cut public spending and bring the budget deficit to 5.9% of GDP in 2010, from around 8% of GDP estimated for 2009.

The Romanian government is expected to pass its 2010 draft budget shortly, a key requirement to unlock new disbursements in foreign aid.