Prices will rise significantly this year, the National Bank of Romania warns, anticipating the inflation rate will reach 4.2% at the end of the year. The previous estimation of the Central Bank was 3%.
The National Bank of Romania (BNR) announced on Friday that it had increased from 3% to 4.2% the inflation forecast for the end of the year, as the stimulation of domestic demand over the potential of the economy and the increase of international oil prices put pressure on inflation, digi24.ro reports.
In February, the BNR had already risen from 2.9% to 3% the inflation forecast for the end of this year and projected 3.1% for the end of 2020.
The annual inflation rate, which measures the evolution of consumer prices in the past year, increased to 4.11% in April after 4.03% in March, as potatoes increased by 32.33% only in the past four months, according to data recently released by the National Statistics Institute (INS).
“Unitary labour costs push prices up, and on the other hand, there is the danger of loss of competitiveness, our products become more expensive, we have a large economic growth based on consumption. Our message remains the same: more investments, less consumption, mainly public investment,” said Mugur Isarescu, the Governor of the National Bank of Romania, in a press conference.
“We have an incentive for demand beyond the economy’s capability. Then we have external factors that we cannot control, such as the increase in international oil prices,” Isarescu added.
The Governor warned that monetary policy can only provide more time for structural reforms but cannot solve all the economic problems.
“There is an illusion that monetary policy can solve everything. No, monetary policy can gain time, provide financial stability. Structural reforms are made more difficult under conditions of financial instability. We keep things under control, we do not kill economic growth, but that’s all. We are gaining time, but structural reforms do not happen overnight,” Mugur Isarescu pointed out.
He warned that for the next period there are mixed signals, and Romania is still deficient in infrastructure investments.
PSD’s Dragnea, ironic about the warning
“I do not comment, I am not the BNR’s commentator, but I know BNR has very good and smart commentators. (…) Fortunately, what we said in the governing programme has become reality. The EU said economic growth will reach 3.3%, yet we’ve registered 5.1%. (…) Every year we’ve been told ‘it’s going to be bad’. The Romanians live better and economic growth is high, so I don’t want to comment anyone’s forecasts,” Dragnea said on Thursday while in Topoloveni.