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August 13, 2022

Senate President predicts higher inflation-busting costs ahead: Regrettably, the estimates I have made so far have proven to be right

Senate President Florin Citu predicts high inflation-busting costs lying ahead, noting also that inflation-curbing measures should have been taken earlier, and that the delay will result in even tougher costs.

“Regrettably, the estimates I have made so far have proven to be right. In January I cautioned that if we don’t take due action there will be a slowdown in economic growth and there will be a double-digit increase in inflation in March and this is exactly what happened. One cannot blame the Ukraine war all the time, because if I look at the surrounding countries, the estimates for Hungary or Poland are getting adjusted by mere 0.8, not 2.4 percentage points. All right, there’s also Bulgaria with 1.2 [percentage points], but no one has an adjustment as high as ours. So it’s clear that this is specific to us,” Citu declared on Tuesday at the Palace of Parliament.

He also warned that correcting inflation will be very difficult.

“Central bank estimates show that by the end of the year we would be close to 10 percent, as they saw inflation hitting 11 percent later on. We have already overshot this scenario. What are the costs of reducing this inflation? They will be high in the upcoming period. This is why appropriate measures should have been taken earlier. The more inflation-busting measures and steps to correct the macroeconomic balance are delayed, the tougher these measures will be in the future,” Citu said.

In his opinion Romania will experience a double-digit inflation rate at year-end, which could even exceed 15 percent, and the Finance Ministry and the National Bank share the responsibility for this.

“The Finance Ministry must send a clear message that it has the deficit in check and keeps it steady, and this needs to be a credible message. You must think like economy experts do. If we announce that we will pump more money into the economy, it’s normal for everyone to say ‘Okay, so there’s still room to go’, and that’s why a spiral is being created, so I’d be more careful. On the other hand, the central bank, which is mandated by the Romanian people through the Parliament of Romania to deliver stable prices, needs to do more. It’s clear that a 10 percent inflation doesn’t mean stable prices and they should take responsibility for this. The responsibility is shared between the Finance Ministry and the National Bank,” Florin Citu said, according to Agerpres.

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