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May 16, 2022

Central bank governor Isarescu: Domestic demand translates in imports, consumption-related jobs are mostly foreign

Romania does have economic growth but the stimulation of demand and consumption has rather created jobs in other countries, given that demand is preponderantly covered from imports which grow at a faster pace than exports, argues governor of the National Bank of Romania (BNR) Mugur Isarescu, according to Agerpres.

“In Romania we do have economic growth, we don’t have deflation, although the annual index stays in the negative, and from the perspective of the monetary policy we have kept our maneuver leeway: we have all the instruments at hand – the interest rate, the corridor, liquidity regulation, the minimum reserve requirements. But despite that, we see that the stimulation of demand and consumption have rather created jobs in other countries. Now imports grow faster than exports, demand translates into imports, although it would have been better if the stimulus had come from a boost in internal production. We are not against incentives, but it is imperative that they are carefully chosen, in an appropriate dosage and that they are timely implemented,” the BNR governor said in the message to the annual conference of the Association of Financial and Banking Analysts of Romania.

In this context, Mugur Isarescu also highlighted the need to preserve macrostability and internal balance.

“We must keep [macrostability] like the apple of the eye, because this is where sustainability and the durability of our development and welfare derive from in a world faced with a lot of uncertainties and changes,” said the BNR official.

He also mentioned that these notions and messages that seem perfectly understandable to professionals must be explained at all levels in Romania, including by the financial analysts attending the conference.

“Sustainability is a complex notion, it isn’t easy to understand, although the crisis has highlighted the implications and imbalances caused by short-term policies that promote unsustainable measures. Some decisions eagerly expected by the public can exacerbate economy vulnerabilities, especially in the situation of countries under full process of transformation, of real convergence – this here is yet another complex notion that needs to be explained, because it is not limited just to the GDP per capita, but has also a structural and institutional component,” Isarescu underscored.

For these reasons the BNR governor argues that it is essential that the Romanian public, the decision-makers included, but also those interested in the evolution of Romania, understand the role of balanced approaches and policies in the current global context, which is strongly marked by uncertainties, but also by populist tones.

“Imbalances occur relatively easily, especially in a volatile environment, and correcting them is painful. Without a fair measure it will be hard to convince, and the feelings and perception of investors, but also of the people affected by the measures reached by decision makers can change rapidly and can in their turn trigger changes that are not always beneficial,” the BNR official said.

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