BNR Raises End-of-Year Inflation Forecast to 4.9% for 2024. EC: Romania, the highest inflation in the EU

The European Commission significantly worsened the forecast regarding Romania's budget deficit in 2024

The National Bank of Romania (BNR) has revised upward, to 4.9%, from 4.7% previously, the inflation forecast for the end of this year, and anticipates that it will reach 3.5% at the end of 2025, according to the data presented on Wednesday by the governor of the BNR, Mugur Isărescu.

“We have a downward inflation trajectory, somewhat less pronounced in the February projection. So inflation goes down gradually, not suddenly, and somewhere at the end of 2025, the beginning of 2026, it enters the band. It is somewhat slower than we previously forecast and this reduction in headline inflation is mainly driven by the core inflation component, adjusted CORE2, which is good. It shows that monetary policy is working. We don’t keep it very tight either, but we don’t let it go too hard either to have inflationary tendencies. We are trying that combination to bring inflation down without creating a recession”, said Mugur Isărescu.
According to the governor of the BNR, the fact that we reach the target, of 2.5% plus/minus one percentage point, a little later is important but also depends on the future decisions of the national bank, “when and by how much we will reduce the monetary policy rate “.
The Governor of the National Bank of Romania, Mugur Isărescu, said on Wednesday, referring to the accusations that the Government is borrowing to finance the budget deficit, that the solution is not to stop financing the deficit, because this would mean a terrible shock to the economy and for the country. He explained that the solution is to reduce the fiscal deficit both on the expenditure side and on the revenue side.
Isărescu stated that if the Government stopped financing the deficit, then this would lead to more crises, including economic and political ones. “I hear discussions in public that the problem is the fact that the Government borrows. What does it mean if the Government could not borrow and would not finance the deficit? It means not only financial crisis, it means economic crisis, social crisis, political crisis. I experienced these events in the 90s, when we had no foreign debt then or it was very small and we were desperate to find money to finance the budget deficit, which was smaller anyway. They were extremely difficult years”, Mugur Isărescu also stated.
He explained that the solution is not to stop financing the deficit. “The solution is not to stop financing the deficit. This would mean a terrible shock for the economy and for the country. The solution is to reduce the fiscal deficit both on the expenditure side and on the revenue side, in both parts. These are the options that the Government must make, and notice that they are very difficult to make. We are still trying to bring inflation down gradually, we don’t shock the economy, we don’t brutally press the brakes, on the monetary policy, we don’t create a recession because we still need that in an election year”, the governor of the BNR also pointed out, adding that inflation is fueled by rising wages.
EC: Romania, the highest inflation in the EU, but also one of the highest economic growth
On the other hand, the spring economic forecast of the European Commission predicts an increase in Romania’s GDP by 3.3 percent in 2024, one of the best rates among the EU states.
The lowest score of our country is the inflation rate, estimated at 5.9 percent, the highest in the European Union. Similar negative figures are for the government balance sheet.
The Commission’s economic forecasts show European GDP growing by 1 percent in 2024 and by 1.6 percent in 2025. Romania is among the countries with the best growth forecast: 3.3 percent in 2024 and 3.1 percent in the year 2025.
A for investments, Romania has the best estimate for 2024, an increase of 6.8 percent, compared to the European average of 0.3. The same for 2025: an increase of 6.1 percent compared to the European average of 2 percent.
The unemployment rate again has better values for our country than the European average: for 2024 the rate is 5.5 compared to the community average of 6.1, and for 2025 we have an estimate of 5.5 percent compared to 6 percent as the European average.
In terms of inflation, however, Romania scores as the weakest in the European Union, with an estimate of 5.9 percent for 2024, while the EU average is 2.7.
For 2025, the estimates show for Romania an inflation of 4 percent, again the highest in the Union whose average is 2.2 percent.
Forecasts for the government fiscal balance again show the largest negative figures for our country: minus 6.9 percent in 2024 compared to the European average of minus 3 percent and even more in 2025, in this case minus 7 percent compared to the European average of minus 2.9.
2024BNRcentral bankMugur IsarescuNational Bank of Romaniarecessionunflation
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