ECONOMY FINANCE&BANKING

National Bank Governor on wage rise: In wrong dose, medication can do more harm than good. BNR targets 4.2 percent inflation for end of year

Romania’s economic growth may be a reason for pride, but so far this has caused imbalances and all the measures taken in this electoral year, wage rises included, should be finely dosed because – just as in medicine – excess can do more harm than good, governor of the National Bank of Romania (BNR) Mugur Isarescu told a press conference on Friday.

He was asked if the 5.5 percent economic advance could be a reason of pride for Romania.

“Our judgment is as follows: as long as we can ensure real convergence, [the economic growth] is an asset, yet without imbalances. Sooner or later an imbalance will need to be corrected and if you don’t know how to do it in time, you won’t have a ‘soft landing, the market will shift abruptly by a plunge in economic growth. It’s the market that will lead to this. (…) We’ve been through this in 2008 – 2009, with the correction that happened after a record-high increase in the previous year, because the crisis rolled in. And then it’s preferable to have a growth that does not cause imbalance, so to say, that does not create too big deficits,” said the head of the central bank, according to Agerpres.

Isarescu explained that what is happening now is already producing imbalances.

“The issue now are imbalances, wether we keep them under control or not, especially the foreign imbalance. I’ve heard such smug claims that ‘we can live with the foreign imbalance’. Attention! I don’t know how we can live with it. Foreign imbalances and ensuring financing require top attention,” the BNR governor warned.

 

BNR targets 4.2 percent inflation for end of year

 

The National Bank of Romania (BNR) upwardly revised to 4.2 percent the inflation estimate for the end of the year, forecasting a 3.3 percent inflation for 2020, BNR governor Mugur Isarescu told a press conference in which he presented the quarterly report on inflation.

In February 2019, BNR estimated a 3-percent inflation rate for the end of the year and 3.1 percent for 2020.

According to the central bank, the annual inflation rate will remain above the upper limit of the inflation target for 2019, because of the offer-related shocks in the first part of the year.

Later on, the inflation rate will reposition itself and it will maintain in the upper half of the target range, as a consequence of the disappearance of the effects of these unfavorable shocks and persisting inflation pressure at the basic inflation level.

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