The Central Bank’s yearly report

Romania has a robust economic growth, which continues to be chiefly based on consumption, says the Central Bank governor Mugur Isarescu

Ştefan Stoica, 11.07.2019, 14:32

The European
Commission has revised its forecasts on Romania’s economic growth rate this
year up to 4% pointing out to a rise in its GDP of up to 3.3%. However, there
is a significant difference between the European Commission forecasts and those
made by the authorities in Bucharest who drew up the country’s budget based on
a 5.5% growth.

According to the
EU Executive’s summer estimates, the growth rate is going to slow down next
year to 3.7%. Public consumption remains the economy’s main engine, spurred by
the latest pay rises. Investment is also on the rise chiefly thanks to the
recovery experienced by the construction sector, stimulated by fiscal measures.

The Commission believes
inflation will stay around 4.2% this year and at 3.7% next year. Romania has a
robust economic growth though it remains chiefly based on consumption, the
country’s central bank governor Mugur Isarescu says. During the presentation of
the bank’s annual report, Isarescu has explained how the economic growth is
backed less by investment whereas the export’s negative contribution has been
significantly higher than in 2007.

Mugur Isarescu: We have an economic growth or domestic absorption to be more correct,
beyond what the economy can provide. Consumption has been boosted more than
what the economy can provide and part of this growing demand, coming from pay
rises, from stimulated consumption, could not be covered from the domestic
output and was covered from imports instead. The consolidated budget was being kept
under 3% but it’s been the last time since 2015 when we are able to meet our
structural deficit budget around the limit of 3%. Budget, salary and investment
expenses are going in opposite directions.

Mugur Isarescu
has declared himself satisfied with the low fluctuation of the national
currency and also with the public debt, which remained at the same debt-to-GDP
ratio, around 35%, being among Europe’s lowest.

Mugur Isarescu: In spite of negativistic forecasts, the debt rate didn’t rise as against
the GDP. Of course, the GDP’s rapid growth has largely contributed to that.
Public debt stands around 35% of GDP, one of the lowest in Europe and we’d
better keep it at this ratio.

This performance
has also been noticed by the rating agencies, and that could allow us to get bigger
loans from the international market at relatively low costs, Mugur Isarescu has
explained. The problem is how we use money and why we see this deficit increase.
Referring to the inflation rate, the central bank governor said that after an
increase in the first half of last year, towards the end of the year, it
reached the level of 2017.

With a mandate
of almost 30 years at the helm of the country’s central bank governor, Mugur
Isarescu says that Romania boasts a credible central bank stable at international
level, which has obtained good financial results.

(translated by
bill)