fbpx

SIMILAR ARTICLES

Loss in competitiveness compared to Hungary and Poland: Real effective exchange rate – a critical indicator for Romania

Romania has improved its competitiveness compared to the Czech Republic and Bulgaria at the regional level in recent years but lost ground compared to Croatia,… Mai mult

Gas extraction from Black Sea will become unprofitable if investment starts after 2022 – ANRM estimate

If delayed long after 2022, the investment in natural gas exploitation in the Romanian commercial area of ​​the Black Sea could become unprofitable. Also, not… Mai mult

A decade of change in Romanian economy structure: Trade, public sector salaries and IT replace the loss of industry and agriculture contribution to GVA

The structure of Romania’s economy has a number of peculiarities compared to the European average in terms of the contribution brought by major sectors to… Mai mult

GDP 2020, equal to GDP 2019 in nominal terms and GDP 2018 in real terms

The National Institute of Statistics confirmed the signal result of the economic growth for 2020 at the level of -3.9%, in the first preliminary version… Mai mult

Romgaz will submit an offer to take over ExxonMobil’s stake in the Black Sea, in Neptun Deep

Romgaz (SNG) will submit an offer to take over ExxonMobil’s participation in the concession for the exploitation of natural gas from Neptun Deep perimeter in… Mai mult

BNR minutes: Soft terms that Governor used for assessing serious problems. List of critical situations

de Adrian N Ionescu , 27.5.2019

The volatility of the new benchmark indicator for loans granted to the population, IRCC – which declined in May, despite the central bank’s control on liquidity – was one of the topics debated by the Board of Directors of the National Bank of Romania (BNR) in its meeting held on May 15th.

The impact of the new indicator on the monetary policy transmission mechanism has also been analysed, as well as recent inflation’s evolution, which, in the context of increased consumption, exceeded forecasts.

Among the concerns expressed by the BNR’s management there were:

  • the evolution of the current account deficit,
  • the improbability of an increase in investment
  • tensions in the labour market.

In this context, although the board has decided to maintain interest rates, they estimated that, given the macroeconomic conditions and internal and external risks, a stronger control on the money market liquidity is essential.

Sweetness in formulations for alerting on critical situations:

1- Economic growth “in the context of new data; its main determining factor is the stock variation, followed by households’ consumption

2- “Gross fixed capital formation (that is investments – editor’s note) and net exports act toward the erosion of the economic growth

3- “negative contribution of net exports may increase,

given the strong acceleration in the annual growth of the trade deficit in first three months of the year, in the context of a stronger decline in the dynamics of exports of goods and services”

4 – “Continued deepening, in this context, of the current account deficit compared to the same period of the last year was considered worrisome by some members of the board” (in fact, the current account deficit went long time ago beyond the alarm threshold – editor’s note)

5- “A clear recovery of investment is considered unlikely given the constraints created by the structure of the budget program, as well as the frequent legislative measures and amendments implemented in recent years that are likely to affect companies’ profits and confidence but also the rhythm of direct foreign investment”

The big problem of inflation and labour crisis

  • It has been noted that during the first months of the year the annual inflation rate went consistently against the forecasts and all major CPI components had monthly increases above expectations. Evolution in the vegetable and fruit segment, tobacco and fuel products, as well as the dynamics of the basic inflation component were decisive in reaccelerating inflation
  • According to the opinion expressed by several board members, the overall evolution of core inflation continues to show inflationary pressures on demand and salary costs, in line with the cyclical position of the economy and a boosting private consumption in the fourth quarter of 2018 – probably extended in the first quarter of 2019 – as well as a large increase in the annual rhythm of the unitary unit labour cost in the manufacturing sector in the first months of the year.
  • Some members of the board have stressed that tensions on labour market foster the increase of unit labour costs and, implicitly, inflationary pressures, and noted that this is a general phenomenon in emerging economies in Central and Eastern Europe.
  • With regard to future developments, board members have indicated that the annual inflation will probably remain this year above the target range, above the previously projected levels, then would return to the forecasted level published in the February 2019 Inflation Report. It is expected to reach 2 percentage points in December 2019 and 3.4 percentage points at the end of the projection horizon, compared to the corresponding levels previously forecasted at 3.0 percentage points and 3.1 percentage points, respectively.

On monetary conditions: problems of liquidity control and mechanism of monetary policy transmission

  • In the discussions on monetary conditions, board members emphasised on the increase registered in April by the main ROBOR quotes – implicitly their positive spread over the monetary policy rate – but also the relatively broader rise in the interest rate on interbank money market transactions, followed, though, in May by a downward adjustment, even under the central bank’s control of liquidity in the money market made by attracting fixed-term deposits.
  • The high uncertainties generated in this context by the entry into force, as of May 2nd, of the level of 2.36 percentage point of the new benchmark index for loans granted to the population were highlighted, IRCC – calculated based on data from the fourth quarter of 2018 and applicable in the second quarter of 2019 – and the implications of this change on the transmission and conduct of the monetary policy, and in the end on the whole framework of this policy.
  • A balanced mix of policies is also necessary for a controlled adjustment in the current account deficit. At the same time, it was estimated that, given macroeconomic conditions, as well as internal and external risks, a stronger control over the money market liquidity is essential.
Mergeți în homepage ›

Publicat la data de 27.5.2019

Lăsați un comentariu


NEWS

New Renault boss: “Dacia is a miracle. It's time for the brand to flourish"

Luca de Meo (foto), the new general manager (CEO) of Renault group, considers that Dacia project proved to be a miracle and that no one… Mai mult

Pentagon transforms Campia Turzii unit into a NATO air hub at the Black Sea

A former Soviet airbase in central Romania could become a hub for US Air Force operations in south-eastern Europe, where the Pentagon is seeking to… Mai mult

Nuclearelectrica shareholders approved to terminate negotiations with Chinese for building reactors 3 and 4 from Cernavoda

Nuclearelectrica's Board of Directors has been mandated to initiate proceedings to terminate negotiations with China General Nuclear Power Group (CGN), as well as legal effects… Mai mult

Renault holds expansion of its plant in Romania, 15,000 jobs cancelled at global level

"Putting capacity growth projects planned in Morocco and Romania on hold" - is one of the measures included in the draft plan of Renault Group… Mai mult

Romania is a net importer of electricity in 2020 as well

Romania imported an amount of electricity of almost 796 GWh in the first month of this year, by more than 36% above what it exported… Mai mult

Shareholders of Galati steel plant promise investments of one billion euros

GFG Alliance has committed to invest one billion euros to upgrade Galati steel plant in order to reduce emissions and increase production. Another EUR 1… Mai mult

Transport Ministry announces it has sent to Brussels the financing request for Sibiu - Pitesti highway

The Transport Ministry, as the Intermediate Body in Transport, approved the financing request for the project "Construction of Sibiu - Pitesti highway", Sections 1, 4… Mai mult

Romania and Juncker Plan: EUR 720 million attracted, of which 35% by Transgaz for BRUA

(The map of investment financed through Juncker Plan, by GDP share. Darker colours mean higher shares) The operator of national natural gas pipelines, Transgaz (TGN)… Mai mult

Top 3 reasons why young people leave Romania

Lack of trust in authorities, corruption and low living standards are the main reasons why young people leave Romania. The data is part of a… Mai mult

IMM Invest Romania – program implementing rules have been published

The Ministry of Public Finance announces that it has issued the methodological norms for the implementation of the Program for supporting small and medium-sized enterprises… Mai mult

Pollution import and car park expansion: comparisons with the other EU states

Romania is the EU country with the fewest cars in terms of the number of inhabitants, according to data recently published by Eurostat. We appear… Mai mult

Government is trying to save budget deficit: reductions in public administration system, cancellation of bonus for harmful conditions, excise duty on soft drinks

The Government is preparing the public for the first measures aimed at avoiding the budget slippage, which would be applied by the PSD-ALDE government. News… Mai mult

Laura Codruta Kovesi remains alone in the race for European Chief Prosecutor

French Prosecutor Jean-Francois Bohnert will be appointed as head of the European Financial Prosecutor's Office, a position for which he was heard on Thursday, 11… Mai mult

Romania - EU country with highest risk of dying in a road accident, Bulgaria is quickly decreasing number of victims since it built motorways

Romania recorded the highest road deaths in the EU also last year, with 96 deaths per one million inhabitants in 2018, almost double the EU… Mai mult

Latest developments in progress at Health Ministry: Differentiated wages based on performance, competitions organised at a regional level not by hospitals

Sorina Pintea announced on Thursday further new changes that will be brought to the functioning of the health care system, including new rules for employment… Mai mult

ANAF changes selection procedure for liquidators. Main changes

The new order on approval and selection procedures for insolvency practitioners is an important step to a very good direction, industry experts say. ANAF is… Mai mult