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BNR:New set of fiscal & budgetary measures, still pending draft budget - among inflation outlook risks


The uncertainties and risks to the inflation outlook are related to the new set of fiscal and budgetary measures that came into effect on January 1, to the fact that the budget blueprint has not yet been finalised, and implicitly to the future tax and revenue policy, the National Bank of Romania (BNR) said in a release issued on Thursday after the monetary policy meeting of the institution's Board of Directors.

According to the cited source, there are noteworthy uncertainties related to the growth pace of the eurozone and global economy, oil price developments on international markets, the monetary policy led by ECB and the central banks in the region.

According to BNR, the annual CPI inflation rate has further declined in December 2018 to 3.27 pct from 3.43 pct in November, moving deeper into the flat target variation band. December's evolution was mainly due to the fall in fuel prices - against the backdrop of international oil price dynamics - which was partly offset by increases in the prices of vegetables, fruit and tobacco products.

The annualized adjusted CORE 2 inflation (which excludes from the CPI inflation administered and volatile prices for tobacco and alcoholic beverages) dropped slightly to 2.5 pct from 2.6 pct in November.

The annual CPI inflation rate in December was the same as the month before, at 4.6 pct, while the annual average rate based on the harmonized consumer price index rose slightly to 4.1 pct from 4 pct in November.

The BNR has thus achieved its goal to maintain price stability in the medium term, amid a carefully calibrated monetary policy, the release said.

According to the central bank, the rise far beyond expectations of the agricultural output has sped up the annual real GDP growth to 4.4 pct in Q3 2018 from 4.1 pct in the previous quarter. As far as demand is concerned, the variation of inventories had a major contribution to GDP growth, ahead of household consumption with increased support from self-consumption and purchases on the agri-food market, whereas gross fixed capital formation had a negative contribution.

The negative contribution of net exports to GDP dynamics expanded compared to the previous data, against the background of a more pronounced slowdown in the growth rate of exports of goods and services than in that of imports. 

Alongside the worsening of the primary and secondary income balances, this caused a substantial deepening of the current account deficit against the same year-ago period, the BNR release states.