Central bank's Isarescu: Real inflation shielded by fiscal measures

Real inflation was last year shielded by tax measures such as the VAT cut, and if we did the numbers excluding the fiscal impact, the inflation rate would not have been that deep in the negative in the first half of 2017, governor of the National Bank of Romania (BNR) Mugur Isarescu said at the meeting organized by the Senate's Committee on Economy, Industries and Services.

"We had a negative inflation for the most part, almost half of 2017, just as in 2016, but as I was telling you, excuse me if maybe I don't use the best suited word, real inflation was shielded by fiscal measures, by the VAT cut. If we calculated the inflation rate without the fiscal impact we would find that it wasn't that negative so to say, in the first half of last year, it was even positive. These are exogenous factors," Isarescu said.

He explained that apart from discussion, or dialogue, and finding a mix to keep the balance of economy under control, BNR can do nothing about administered prices or tax policies.

The head of the central bank said that inflation has been low in 2015, 2016 and 2017, below BNR's targets, mentioning that low inflation was also the result of the fiscal policy measures.

The annual inflation rate was 3.3 percent at the end of 2017, against the backdrop of food prices going up 4.07 percent and of non-food items growing 4.11 percent more expensive. Service prices increased by 0.22 percent.

The National Bank of Romania revised upwards to 3.5 percent the inflation forecast for end-2018, and estimates an inflation rate of 3.1 percent for the end of 2019. AGERPRES (RO - author: George Banciulea, editor: Andreea Marinescu; EN - author: Simona Klodnischi, editor: Adina Panaitescu)