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October 7, 2022

BNR maintains inflation forecast at 3.5pct for 2018, revises upwards to 2.9pct forecast for 2019

The National Bank of Romania (BNR) has maintained the inflation forecast at 3.5 percent for the end of 2018 and revised upwards to 2.9 percent the forecast for next year, BNR Governor Mugur Isarescu announced on Thursday while presenting the Quarterly Report on inflation.

“We are preserving the 3.5 percent forecast for December 2018, with some risks,” Isarescu said.

For December 2019, the central bank estimates an inflation of 2.9 per cent, down by 0.2 percentage points in addition to the previous forecast, made in August.

The annual average inflation rate in the first nine months of this year was 0.3 percent, as compared to 0.1 percent in the similar period of 2017.

According to data released on 10 October by the National Institute of Statistics, the annual inflation rate in September fell slightly to 5.03pct, from 5.1pct in August, when the price of non-food goods rose by 6, 55pct, foods increased by 4.44pct, and services recorded an advance of 2.54pct. The average monthly inflation rate in the first nine months of this year was 0.3pct, up from 0.1pct in the same period in 2017.

“In the long-term, we forecast that Romania’s economy will not have inflation below 2pct, apart from some decisions such as VAT reduction. If VAT is reduced, we will have inflation going back below 2pct, as we had negative inflation in 2016 and 2015. But in the absence of such decisions, it is a catching-up economy that runs to catch up with the others. In such an economy, you have higher inflation, it’s inevitable,” Isarescu explained.

For example, salary increases in services are inevitable, even if they will not be overnight but in the long run, and these will push up the consumer price index.

“We will be in this position for more ten years, an economy that runs and tries to make up for the gaps,” added the governor of the National Bank of Romania.

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