Romania’s central bank lowers inflation forecast on subdued demand

Romania's National Bank (BNR) has reduced the projected headline inflation estimates compared to its February forecast, to 2.8% at end-2020 (from 2.7% in April), and 2.5% at end-2021.

The figure for December is 0.2 percentage points lower than in the previous Inflation Report, and the forecast for next year is 0.7 pp lower.

"There will be a slight decrease in prices, after which the inflation will hover below the level of 2.5% over a longer period, with relatively small variations," BNR spokesman, Dan Suciu, said after the central bank's board meeting.

Contrary to the forecast in the previous Inflation Report, the economy will witness, starting in Q2, a demand shortfall throughout the projection interval.

The magnitude of this contraction is difficult to assess precisely at present, according to BNR. After having peaked in the current quarter, the disinflationary pressures induced by the demand deficit will decrease gradually.

According to the NBR release, the uncertainties associated with the inflation outlook are unusually high, given the unprecedented nature of such an economic shock nationally and globally, but also changes in consumer behavior.

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