Economic Prospects in the Central Bank’s Vision

The Romanian Central Bank has for the second time this year revised its inflation rate forecasts from 7.8 to 8.2 %; inflation is expected to rise next year from the initial estimates of 3.1%, up to 3.4%, and reach the expected target in late 2011.

However there are certain risks that these central bank predictions may be exceeded.

Under these circumstances, we are likely to see a new wave of price hikes in Romania, though Isarescu remains optimistic, saying they will not exceed the European level: “There are uncertainties concerning the firm implementation of fiscal consolidation measures and structural reforms, as both seem to have been rejected by part of Romanian society. Prices have so far caused a lot of surprises, so we expect them to rise beyond our expectations and estimates.”

Mugur Isarescu went on to say that the National Bank established an inflation rate of 3% for 2012 and of 2.5% for 2013. The crisis situation has been created by unsustainable pay rises in recent years, Isarescu added. In another move, Romanian president Traian Basescu explained that Romania will continue to contract loans from international financial bodies and its foreign debt is expected to reach four billion euros.

Romanian president Traian Băsescu: “We have quite a hefty sum to reimburse – over two billion euros – and as far as I know, next year the sum will remain at 1.6 billion. Domestic and foreign debts amount to 1.9 billion. So we have a consistent sum of four billion euros to pay.

Traian Băsescu called for responsibility from MPs, urging them to quickly pass the law on pensions, the salary law and state budget, absolutely necessary for a new IMF agreement.

In its absence, Romania might be heading for economic meltdown: “Since communism, Romania has never seen a riskier period. This is a watershed moment in our evolution; we can either overcome the crisis and continue towards prosperity, or we can backslide and go down. What we will we do in the coming 45 days from a political point of view will be very important.”