The governor of the National Bank of Romania (BNR), Mugur Isărescu, speaking at the Inflation Report unveiling on May 15, declared that a fiscal correction is "absolutely necessary," but it is hard to carry out such policies during an electoral year such as 2024. 

"[The fiscal correction] is absolutely necessary, and we encourage the government to make this fiscal correction in the ways it finds appropriate. But it is difficult, we admit, in an election year and amid these endless discussions about how to make the fiscal correction," stated Isărescu, quoted by G4media.ro.

As regards the means he finds appropriate to pursue fiscal consolidation, BNR governor Isărescu stressed that both revenue and expenditure sides must be addressed. 

"The fiscal correction will not be easy, it cannot be done only on the expenditure side. When you have revenues below 27% [of GDP], and you only say that the share of salaries and budgets is the highest in Europe [therefore cutting them would solve the problem], you do not consider an essential thing – that they are the highest precisely because the revenues are the lowest in Europe. So the discussions after me will be relatively difficult," Isărescu concluded.

The BNR governor stressed that the fiscal policy has "perhaps the most important" impact on inflation.

"The impact [of the government's expansionist fiscal policy] is important, it is perhaps the most important impact on inflation," he said.

BNR, under the updated inflation forecast, revised upwards the projection for the yearend inflation to 4.9% from 4.7%.

iulian@romania-insider.com

(Photo source: Inquam Photos/Octav Ganea)