THE LEU CONTINUES ITS DEPRECIATION AGAINST THE EURO AND THE DOLAR The exchange rate and the draught vaporizing income

• Călin Rechea: The intervention of the NBR would only have limited effects

An intervention of the NBR to support the leu would only have a limited effect, economic analyst Călin Rechea considers. "The NBR can only halt the depreciation, not stop it", he said. The problem of the leu is that there is no fundamental element that would provide any support to the exchange rate, as our economy has major structural imbalances, according to him.

The persistence of the political instability only compounds the problem, the analyst says.

Speculators play an insignificant part in imposing the pace at which the leu lost ground against the euro over the course of the last few weeks, Călin Rechea considers.

"They are looking for trends they can amplify, but only in the last stage of the depreciation", he explains.

• Sorin Minea: Food prices are rising everyday

The cost of food is influenced by a series of factors, which include the price increases of the commodities in other countries, the exchange rate, the cost of utilities and transport etc., according to Sorin Minea, the president of the Professional Association of the Romanian Food Industry (Romalimenta): \"It is impossible to estimate how much food prices will increase\".

"Everything we eat is calculated in Euros or dollars. Prices are rising constantly, in a different manner, depending on the branch. Food prices are affected by a series of factors - by price increases of the commodities in other countries, the exchange rate, the cost of utilities and transport etc. I couldn't even calculate how much the price of food would increase, in relation to these factors. There is a program which makes the calculations. Food prices are rising almost everyday on the shelf. If we think about how the grains will be sold in autumn, we will then see that in Romania the depreciation is extremely rapid".

He considers that the only reason behind the current situation in Romania is the fact that "the economy was used as a political argument".

Under these circumstances, many investors distribute their profit or speculate.

• Ilie Van: There will be an imbalance between revenues and expenses

The evolution of the exchange rate will have negative effects on the poultry segment as well, said Ilie Van, the president of the Union of Romanian Poultry Breeders (UCPR), who said: "We price everything in Euros and we sell in lei. The wheat in the fields is also prices in Euros. Everything we bring from abroad we bring at much higher prices, and we only export 10-15% of the output. It is very hard to enter new markets at a moment's notice. We hope everything will be over soon".

According to him, there will be an imbalance between revenues and expenses, since all the expenses are in Euros and all the revenues are in lei: "There is a certain inertia of the sector. If things return to normal after the referendum, the sector can bear, for a short while, the effects of the exchange rate. But if they don't, things will get complicated and in about two weeks, prices will increase on the poultry segment".

Ilie Van explained that he can't predict how much prices would increase in the industry, emphasizing that this sector has already hiked prices by 8-10%, in the first part of the current year. Producers do not guarantee price hikes in the second half of 2012, considering how much the price of agricultural products have already been hiked lately.

• Ioan Ladoşi: Pig farms are beginning to lose money again

The exchange rate will have a major influence on the pork meat segment, according to Ioan Ladoşi, the president of the Romanian Professional Association of Pork Meat (PRCP), who said that, after the price of pork carcasses had recovered slightly in March, the little profit that farmers could hope for was eaten away by the recent events - the high prices of grains and soy and the evolution of the exchange rate.

He said that Romanian exports are mostly done in the outsourcing system - pork carcasses are imported, they are processed and then exported -, and the only manufacturer who succeeded in selling pork meat in other countries is "Smithfield".

"We wish that the influence of the exchange rate were included immediately in our end prices, but this only happens a long time after the hike of the price of grains", said Mr. Ladoşi, who considers that the prices of pork meat would have to increase by 15%, if the trend of the exchange rate continued, in order to make sure that the situation in the market return to what it was in April.

• Ioan Benea: Every moment causes losses

Every moment causes losses we can't quantify, said Ioan Benea, the president of the Romanian Potato Farmers Association. According to him, these losses are first of all felt by the vegetable farmers and finally, by the buyers.

In tune with the other producers, Ioan Benea blames the situation in the industry on the high prices of agriculture, (as wheat, potatoes and rapeseed are seriously affected by draught), the high temperatures which have taken place lately and the evolution of the exchange rate.

The devaluation of the leu is affecting vegetable producers especially when it comes to their loan repayments.

"We need to repay the equipment we purchased using leasing, which we pay in foreign currencies. We were happy when we borrowed in foreign currencies, because we were paying less, and now we are paying insanely more because of that", said Mr. Benea.

• Constantin Isac: Carriers - affected particularly by the hike in the price of fuel

Transporters are affected particularly by the recent increase in the price of fuel, according to Constantin Isac, the president of the National Union of Carriers (UNTR), who emphasizes: "There was a time when the price of fuel had become steady, because crude had begun dropping. Over the last two weeks, however, the price of crude has begun rising again, a situation which is compounded by the euro/leu exchange rate".

The evolution of the exchange rate is also negatively affecting the exchange rate, according to Mr. Isac, as well as the loan repayments. He also emphasized that the evolution of the exchange rate has a positive effect on the car industry, as long as we are talking about exports. The negative effects do not counterbalance the positive ones. The pressure the exchange rate places on the industry will be reflected in the prices of shipping and travel costs, which will very soon be hiked by 3% to 5%.

• Radu Zilişteanu: Tenants who get paid in lei will be affected

The real estate market is rather low and as a result there will be no more drops in the prices of homes or in rent, real estate analyst Radu Zilişteanu said. Thus, according to him, in the case of tenants who pay rent in foreign currencies, there will be no renegotiations, and only the people who are compensated in lei will be affected.

Mr. Zilişteanu also said that the prices in lei will not increase, especially since the real estate market is seasonal, and summer is not a good time for real estate transactions.