The Romanian National Bank Issues Forecasts

Romanias National Bank has issued an economic growth estimate for 2013 of 1.5% for the first months of the year, at an inflation of 6% at the most.

Leyla Cheamil, 06.02.2013, 14:45

The central bank has also decided to maintain the reference interest rate of 5.25%. The National Bank of Romania and the IMF agree that Romania’s economic growth stand at around 1.5% this year. Speaking of this, the bank’s governor, Mugur Isarescu, believes that reducing the reference interest rate would discourage domestic savings, which is now below par, and would cause economic shrinking, given the lack of financial resources.

For this reason, the central bank’s board has decided to keep the inter-bank loan rate at 5.25%. As for inflation, the banking authority expects it to be between 5 and 6 percent in the first part of the year, with a prospective value of around 3.5% towards the end. The national budget is built on a projection of 4.3% annual inflation rate and 1.6% economic growth. The inflation forecast, Isarescu has emphasized, also depends on the evolution of volatile prices, especially in agriculture. He has also stated that he doesn’t believe that the impact of scheduled price hikes in natural gas and electricity on food prices would be major. At the same time, Isarescu said that the domestic investment potential is insufficient, which affects economic growth:

“For many reasons, we cannot manage to absorb EU money. Economic growth, before everything, means investment. As we have insufficient domestic investment resources, this reflects in the fact that we still have a 4% current account deficit. In other words, we need investments worth around 4% of the GDP, which is more than we manage to save in this country. Therefore, the issue of policies for attracting foreign money, be it foreign loans, European Union structural money, direct foreign investments or other sources, such as portfolio investments, is vital.”

Mugur Isarescu also has pointed out, again, that Romania has a precautionary loan agreement with the IMF, the EU and the World Bank without having tapped the resources made available under it. The head of the central bank believes that an agreement with the IMF boosts Romania’s credibility on foreign markets.