The fiscal policy does not support the economic recovery, nor can the monetary policy have a higher contribution to the recovery of the economy, because of the persistence of inflationist pressure coming from shocks on offer, despite the fact that Romania is still in recession, BNR governor Mugur Isarescu said during a meeting held at ASE, celebrating 100 years since the founding of the economic university. “We are still in recession or we are leaving it, but we still have inflationist anticipations. (…) We do not believe that, if we had a laxer economic policy, things would be different. (…) The reduction of the budget deficit from 9 pc of the GDP to 3 pc of the GDP represented a big effort, there are 6 percent points of the GDP. The monetary incentive was unable to compensate the fiscal policy. (…) I suspect that the fiscal policy is still pro-cyclic,” Isarescu mentioned.
As for the monetary policy, Isarescu explained that a first limitation, especially in emerging states, comes from the offer shock, and on many occasions central banks are faced with a dilemma: should they accommodate these factors, or not? Reiterating that in Romania targeting the inflation was enforced of a flexible manner, Isarescu said that any central bank permanently keeps an eye on the exchange rate, although no central banker admits it.
The governor also reminded that the liberalisation of the capital account was an obligation for joining the European Union in 2007, and the accession caught Romania unprepared, “with a relatively high inflation and a population without an adequate financial education.”