The National Bank and economic uncertainty

The National Bank of Romania has decided to maintain the monetary policy interest rate at 6.5% per year.

Roxana Vasile, 08.04.2025, 13:50

The National Bank of Romania has decided to maintain the monetary policy interest rate at 6.5% per year. It also decided to keep the interest rates at which commercial banks can get loans from the National Bank or for central bank deposits at 7.5% and 5.5% per year, respectively. The National Bank of Romania warns we are facing great uncertainties and increased risks based, among other things, on the future evolution of energy and food prices, compared to those reported in the same period last year. Inflation will continue to fluctuate in the first half of 2025 and, after recording a drop in March, is expected to increase moderately in the second quarter. The situation will be caused, on the one hand, by the Romanian legislation in the field and, on the other hand, by trade policy measures adopted by developed countries with a potential impact on the quota of raw materials and the international prices of some intermediate and end products. Furthermore, uncertainty and risk are associated with the future national fiscal and income policies, conditions on the labor market, but also with external developments, in the context of the prolonged war in Ukraine and the situation in the Middle East, but especially in the context of the trade policy of the American administration and local measures adopted in response that are likely to affect the course of the global economy and international trade – the Central Bank also points out. Under these circumstances, the president of the organization of investment professionals in Romania – CFA, Adrian Codirlaşu, does not rule out the possibility of a recession in 2025:

“The current context is complicated, even very complicated in economic terms. If we look at the internal context, we have an extremely high budget deficit and pressure to keep it high unless fiscal consolidation measures are taken. We also have a large current account deficit. If we look at external developments, we have a war on the border and a trade war that has just started. Under these circumstances, I would say the risk of recession has increased significantly, so we might have a mild recession this year”.

According to the National Bank, the most recent data and analyses already indicate a pronounced slowdown in economic growth in the first quarter of 2025. This negative outlook could be worsened by the reduction of Romania’s country rating. In this context, economists advocate the importance of absorbing European funds, mainly those from the National Recovery and Resilience Plan, conditioned by the fulfillment of strict targets and milestones essential for the achievement of structural reforms, but also for at least partly counterbalancing the negative effects of geopolitical conflicts. (VP)