Goldman Sachs warns that the leu is overvalued and recommends depreciation to reduce the external deficit

The real effective exchange rate of the leu is too strong relative to the fundamentals of the Romanian economy, and a depreciation of the currency is necessary to correct the external imbalance, according to a Goldman Sachs analysis published on Monday.

Economists at the US bank, Basak Edizgil, Alessa Abraham and Kevin Daly, indicate that Romania is simultaneously facing an unsustainable current account deficit and a widening output gap. The economy is operating below potential, but Goldman Sachs considers adjustment of the external deficit to be a priority.

The report recommends a weakening of the real effective exchange rate, possibly through a larger one-off depreciation, combined with a more restrictive fiscal policy. A weaker leu would improve export competitiveness and help reduce the current account deficit. However, the analysts warn that fiscal measures could temporarily affect the economy before exports are boosted.

The REER index calculated by CFA Romania reached 122.2 in January 2026 and stood at 118.7 in July, approximately 19% above the 2010–2019 average. The real appreciation mainly reflects higher inflation in Romania, not a significant nominal increase in the leu’s value. From 2021 through May 2025, the exchange rate was kept relatively stable by the NBR, while external imbalances intensified. Recent depreciation episodes have only partially offset the accumulated real appreciation.