Optimistic Economic Forecasts

The National Bank of Romania has lowered the inflation forecast for this year and the next to 3.1%.

Newsroom, 08.08.2013, 14:20

In Romania, the inflation forecast for 2013 and for next year has been lowered to 3.1%, that is by 0.1% compared to previous figures. The Central Bank has analyzed and endorsed the quarterly inflation report, which points to a stronger disinflation process for the forthcoming period and an accelerated economic growth.

Governor Mugur Isarescu: “Our target is 2.5%. As far as our 3.1% forecast goes, we might get closer to that target by the end of the year or even sooner. The main factors that will be keeping inflation down are the prices of foodstuffs and farm products, which will go down in July, August and September, and the fact that last year these prices increased significantly. So the difference will be substantial.”

Mugur Isarescu added that the institution will do its best, using the tools available to it, to ensure that interest rates for loans in the national currency get as close as possible to the rates on foreign currency loans, so that bank clients may choose to borrow lei and thus reduce the risks related to exchange rate variations.

Mugur Isarescu: “The foreign currency resources of many banks are not as steady and low-priced as they used to be. Parent banks have become more cautious, or have problems of their own. Foreign currency loans have a visible, explicit cost, but also a hidden, uncertain cost component, and this is what triggers abusive clauses. By reducing the monetary policy interest rate and assuring adequate cash flows in the market, we will do our best to push interest rates for Romanian currency loans closer to those for foreign currency crediting.”

The new European regulations discourage foreign currency loans, the central bank governor also said. He explained that such loans have an unpredictable and highly dangerous component, which has become evident over the past few years and affected the resources of many Romanians who had thought foreign currency loans are more advantageous. The National Bank has reduced the key interest rate from 5% to an all-time low of 4.5%. At present, the average interest rate on a mortgage-backed loan in lei is 8%, as compared to 4.5% for a similar product in euros. According to analysts, taking out loans in the national currency is by 30% more expensive than in euros.