The latest statistical data confirm the fall of annual inflation rate into negative territory under the impact of broadening the scope of the reduced VAT rate to all food items and public food services, says the National Bank of Romania (NBR).
”The new forecast shows the annual inflation rate sticking to negative values over the next three quarters, before returning into positive territory, but below the lower bound of the variation band of the flat target, until the beginning of 2017”, say NBR officials, while announcing the institution kept the record-low interest rate of 1.75%.
”In the same period, economic growth gained momentum, driven by the substantial pick-up in final consumption and by the positive investment dynamics, also against the backdrop of the recovery in lending”, NBR officials say.
Therefore, in June 2015, the annual inflation rate slipped to -1.6%, from 1.2% in the previous month. The disinflationary shock which has stemmed from the first-round effects of the cut in the VAT rate on food items, to 9% from 24%, and which has impacted the prices of nearly 30% of the goods and services included in the consumer basket was stronger than expected. Statistical data show that food prices for which the VAT rate was cut have fallen by 9.8% in June versus May.
At global level, the recent period is characterized by still tepid economic recovery and heightened volatility on foreign financial markets, amid the protracted uncertainty relating to the situation in Greece, the economic picture in China, and the diverging monetary policy stances of the world’s major central banks.
On the domestic front, the authorities envisage implementing a number of fiscal policy measures (the package of fiscal easing measures and the updated unified wage law) that have a direct impact on macroeconomic stability and the economic policy mix agreed upon with international institutions under the external financial arrangements.
All these factors, which are likely to affect the global appetite for risk and investor perception regarding the Romanian economy, weigh on the management of domestic macroeconomic policies, concludes the NBR statement.