Romania’s central bank confirms smooth disinflation scenario

Romania’s central bank (BNR), in the latest Inflation Report on November 10, affirmed the yearend inflation forecast at 7.5% y/y and revised slightly upward the end-2024 projection from 4.4% y/y to 4.8% y/y. 

The headline inflation in Romania will remain on its downward path under BNR’s baseline scenario, except for a short respite in Q1 next year caused by fiscal policy.

The first-round impact of the new VAT and excise duty regime, updated as per the fiscal package effective January 1, is estimated at 0.9 percentage points (pp). However, inflation will return shortly to the downward path and reach 3.3% y/y, thus entering the target band at the end of Q3 2025. 

Subdued economic growth below potential (negative GDP gap starting at the end of 2024), lower inflationary expectations and softer pressures coming from the import prices will drag down the CORE2 inflation, making it the main contributor to the overall disinflationary process over the entire forecast period. 

The inflation scenario sketched by BNR in its latest Inflation Forecast is subject to positive risks generated by the Middle East developments, while the global slowdown is a source of pressures in the opposite direction. 

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