Inflation will rise by the end of this year, mainly due to adjustments in electricity and fuel prices, but these price adjustments will dissipate in 2022, allowing inflation to return to the target range, the International Monetary Fund (IMF) said in a statement published following the evaluation mission of the Romanian economy.

“The NBR has decisively relaxed monetary and financial policy in response to the pandemic. Inflation is expected to rise by the end of this year, mainly due to adjustments in electricity and fuel prices, with anticipation that these price adjustments will dissipate. This will allow inflation to return to the target range in 2022. The continuation of the accommodative monetary policy aimed at helping to ensure recovery is appropriate, given well-anchored inflation expectations, the negative output gap and reduced wage growth projections. As fiscal consolidation progresses, the extension of accommodative monetary policy beyond this year may be appropriate, as long as it is in line with the inflation target,” the IMF statement said, folowing closing to the Chapter IV, according to Agerpres.

However, the international financial institution claims that, amid strong economic growth, the current account deficit is expected to rise further this year to around 5.5% of GDP.

“As the crisis eases, the gradual increase in exchange rate flexibility would help absorb external shocks and, coupled with fiscal consolidation, could also help reduce the current account deficit,” IMF officials said.