Board of Directors of the National Bank of Romania decided yesterday to maintain the monetary policy interest rate at 6.50 percent per year, despite the inflationary surge at the end of last year and the growth expectations following the new fiscal-budgetary measures at the beginning of this year, which “give rise to significant uncertainties and risks,” say central bank officials.
“The annual inflation rate increased in the last three months of 2024 more than anticipated, rising in December to 5.14 percent, from 4.62 percent in September. The advance compared to the end of the third quarter was mainly driven by the increase in fuel prices – primarily as a result of the significant appreciation of the US dollar on the international financial market,” say NBR officials.
The annual inflation rate calculated on the basis of the Harmonized Index of Consumer Prices (HICP – an indicator of inflation for the EU Member States) increased to 5.5 percent in December, from 4.8 percent in September 2024.
Economic activity stagnated in the third quarter of 2024, after growing by 0.1 percent in the previous three months (quarterly change), an evolution that makes a contraction of the aggregate demand surplus likely in this interval as well.
Compared to the same period last year, GDP growth increased to 1.2 percent in the third quarter of 2024, from 0.9 percent in the previous quarter. The annual growth in household consumption remained alert during this period, although it slowed down compared to the second quarter, while the annual dynamics of gross fixed capital formation extended its relatively steep decline, reaching a minimum of the last 9 quarters, the NBR claims.
However, the evolution of net exports considerably reduced its contractionary impact in the third quarter of 2024, amid the relatively more pronounced decrease in the annual variation in the volume of imports of goods and services, which nevertheless remained in positive territory. As a result, the trade deficit, as well as the current account deficit, significantly moderated their annual growth compared to the previous quarter.
“The latest data and analyses indicate a moderate growth of the economy in quarterly terms in the fourth quarter of 2024, in line with previous forecasts.
“The new assessments reconfirm the prospect of a decrease in the annual inflation rate in the first three months of this year, but on a higher trajectory than previously anticipated. The decrease will be driven mainly by consistent base effects and the deceleration of import price growth, but in the context of the persistence of the opposite effects exerted on the dynamics of food and energy prices by unfavorable weather conditions in 2024 and the increase in the prices of some commodities, as well as by the increase in energy consumption in the winter months,” the NBR report also states.
