Monetary policy should remain the primary near-term anchor for the leu. The National Bank of Romania (NBR) has held its policy rate at 6.50% throughout 2026, and our base case calls for 50bp of easing in 2027, contingent on a smoother disinflation path. Softer activity alongside easing headline inflation could justify an earlier start, yet persistent services-side price pressures, potential bouts of political uncertainty, and adverse global risk-off episodes may push the easing cycle back. Against this backdrop, liquidity management is likely to remain a central element of the NBR’s balancing act. The liquidity surplus contracted sharply through October, from roughly RON20.8bn to RON4.9bn, reinforcing tighter money-market conditions during a recent stretch of intense FX pressure. Since then, FX-implied yields have eased back from an early-October peak to more manageable levels, broadly in line with their one-year average. Acute pressure on the currency appears to have subsided since mid-October, though a leaner liquidity surplus ahead may well continue to bolster monetary transmission and deter renewed short positioning.
The domestic slowdown has yet to produce a convincing narrowing of Romania’s external imbalance. Retail sales have declined for more than a year, pointing to weaker household demand, fiscal consolidation, and elevated inflation. Even so, the January–September trade deficit stayed visibly high at 6.3% of GDP in 2026, only slightly below the 6.5% recorded in 2025 and 6.7% in 2024 over the same window. The investment cycle has continued to drive imports despite softer consumption. In particular, the final push to complete RRF-funded infrastructure, transport, energy, and healthcare projects has fuelled strong demand for imported machinery, equipment, and intermediate inputs. We estimate Romania’s potential growth at around 2.0% today, but productive investment could lift it toward 2.4–2.7% over 2027–2029 through improved infrastructure, connectivity, and energy availability, which should support the medium- and long-term fundamentals for the leu.
Our base case points to further gradual depreciation in 2027, with fiscal credibility, political stability, and capital flows the key variables to monitor. The preservation of Romania’s investment-grade rating has offered some relief, but markets remain cautious about fiscal execution and the delivery of a credible medium-term consolidation plan. In this setting, uncertainty over Romania’s ability to absorb the remaining €6.4bn of RRF funds poses an added near-term risk. Delays or weaker-than-expected absorption would intensify pressure on both domestic and market-based funding. We expect the NBR to keep a firm grip on the currency, discouraging one-sided positioning. Our forecasts see EUR/RON holding near 5.35 by end-2026 before drifting gradually toward 5.45 by end-2027. Renewed political instability, fiscal slippage, or softer RRF absorption could accelerate the pace of depreciation.