Key Interest Rate stays at 7%

Romanias Central Bank keeps the key interest rate at the same level

Ştefan Stoica, 14.02.2024, 14:00

Romania’s Central Bank has kept the
key interest rate at 7% this year, a measure taken at a time when the latest
data released shows a lower economic growth in the last three months of 2023.
The interest rates at which the commercial banks can borrow from the central
bank have also been maintained as well as those they have when they keep their
deposits in the Central Bank. The key interest rate hasn’t changed since
January last year, when it went from 6.75 to 7%.

The Central Bank’s present
forecast shows a rise in the annual inflation rate at the beginning of the year
under the impact of the introduction and rising of indirect taxes and duties.
After this the inflation rate is expected to come back to a downward trend at a
slower pace though as compared to both 2023 and the previous forecasts. According
to central bank experts, future fiscal and income policies, the effects of the
war in Ukraine and the Middle East conflict as well as the developments in
Europe, particularly in Germany, represent other uncertainties and even risks
concerning the inflation rate. In another development the current account of
the balance of payment has registered a deficit of nearly 22.7 billion euros,
3.3 billion less than that registered in 2022, says data released by the Central
Bank. This reduction was mainly due to
the fact that the balance of goods registered a deficit lower by nearly 3
billion Euros while the balance of services saw a surplus of more than 204
million. Here is financial analyst Adrian Codirlasu with more.

Adrian Codirlasu: If we take the component of the current
account deficit we see that on the goods side imports went down a little bit,
actually the prices of imported goods went down. For instance the prices of the
imported goods based on intensive energy consumption went down as energy prices
also decreased. In terms of services, the biggest rise was seen in the
transport sector. Against the background of the war in Ukraine, we are helping this
country to export its products and we see that we are also getting profit from
this activity. We have surplus in the service sector but the highest
contribution to this surplus came from the transport section.

Direct foreign investment in Romania last year
stood at nearly 6.6 billion Euros as compared to 10 billion in 2022. According
to the Central Bank, in 2022, the total foreign debt rose by nearly 25 billion Euros
up to roughly 169 billion.

(bill)