RO central bank projects steady inflation amid gloomy GDP scenario

Romania's National Bank (BNR), under its latest Quarterly Inflation Outlook, revised marginally downward the forecast for the headline inflation for the end of this year to 2.7% from 2.8% previously.

The annual inflation will reach the center of the inflation targeting band (2.5%) at the end of 2021 after it will fall below that in the first part of the next year, according to BNR's projections.

The baseline scenario of the macroeconomic projection is based on the assumption of keeping the epidemic under control nationwide, which would help avoid the reintroduction of broad-based administrative social-distancing measures in the future.

BNR mentions rising uncertainty prompted by the increase in the number of infections recently.

Under the baseline scenario, for 2020 as a whole, the annual GDP growth rate is expected to post a significant negative value, close to those recorded at the height of the 2008-2009 economic crisis (-5.6%).

Still, the aggregated income losses should be fully recovered within at least a year, the central bank expects. Notably, the central bank's baseline scenario is visibly more pessimistic compared to the 2-3% economic contraction expected by the Government.

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