BNR Governor on trade imbalances: The correction is unavoidable. Inflation forecast revised downwards to 3.5pc

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The National Bank of Romania, repeatedly accused by the PSD-ALDE ruling coalition of failing to control the inflation, has presented on Wednesday new analyses and forecasts about the price increases in 2018 and about the development of the currency exchange.

BNR Governor, Mugur Isarescu, has presented on Wednesday the quarterly report on inflation. The central bank recommended the Government to stop stimulating the consumption through fiscal measures, to make the structural reforms the economy needs, to watch out the declining confidence of the Romanians in the economy, the deficit and the inflationary pressures, also warning that the competitiveness of the Romanian products is dropping.

Isarescu has announced that the central bank has revised downwards the inflation forecast to 3.5% this year, down from 3.6% the previous anticipation. For 2019 the inflation rate is expected to reach 2.7%, down by 0.2 percentage points against the former forecast.

BNR argues that mitigation is anticipated, given the reduced contribution to inflation of the exogenous components, whereas the level of basic inflation is expected to accumulate pressure, mainly in 2019. The annual consumer price index inflation will remain within the targeted interval in early 2019 up to the time horizon limit, it says.

However, Mugur Isarescu has drawn the attention on trade imbalances, not yet corrected.

“Correction is unavoidable, the trade deficit cannot grow indefinitely. Look at the trade balance, it should raise questions,” the BNR Governor said about the increasing deficit between imports and exports.

The wage expectations are far from being calmed down, he added.

The economic growth will reach 4% this year, depending on the coming months. The BNR forecast is below the Government’s, i.e. 4% against 5.5%.

Governor Isarescu argued that the growth potential in the region has shown that the countries which registered GDP increase of 4-5%, have made progress over long term more than the ones with 7% economic growth for some intervals.

June 2018 was the fifth consecutive month for Romania to register the highest annual inflation rate in the EU, of 4.7%, up from 4.6% in May, according to Eurostat.

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