The National Bank of Romania (BNR) has revised its inflation forecast upward for the end of 2025 to 4.6%, from the previously estimated 3.8%, and now expects inflation to reach 3.4% by the end of 2026, compared to the earlier forecast of 3.1%, according to data BNR Governor Mugur Isarescu presented on Tuesday.
‘The external coordinates are more or less the same. This is the forecast. It doesn’t look bad, just a bit worse than before, let’s say. At the end of the forecast period, instead of 3.1%, it’s 3.4%; and in the second half of this year, instead of 3.8%, it’s 4.6%. But this forecast was made using data from before May 1. It does not reflect what happened during the election period, and it could change significantly, not drastically, but noticeably. That’s why I’m not presenting it here; it’s in the report, you can analyse it yourselves. Inflation is coming down, which is very good,’ Isarescu said.
He pointed out that while Romania’s inflation is still the highest in Europe, it is now below 5%, which makes it a problem, but ‘not a fundamental one.’ He highlighted that the real issue is the public deficit.
‘How do we correct it? How fast do we correct it? How credible are we? Having a 9% public deficit and 4% inflation is not inexplicable. The key issue is that core inflation (adjusted CORE2) is decreasing, which is the component the National Bank monitors and guides. We must carefully manage the tightening of aggregate demand to bring down adjusted CORE2. But reducing demand also slows economic growth, and we are already seeing a slowdown,’ he explained.
Isarescu noted that BNR will work with the new government to identify the best solutions to lower inflation, based on a gradual and sustainable reduction of the public deficit, without triggering a recession.
He also warned of increased risks, highlighting how political instability and a prolonged election season have had significant effects on capital flows, which will be reflected in the upcoming report on Romania’s foreign currency reserves.
Isarescu also said major capital outflows in the past two weeks impact liquidity in the market, the central bank’s reserves, and possibly the exchange rate as well.
AGERPRES
