IMF's Liviu Voinea: Current inflation just temporary as factors driving it are short-lived

The inflation that is currently affecting the global economy will be temporary because the factors causing it are just short-lived, International Monetary Fund senior advisor Liviu Voinea declared at the Bucharest Forum 2021 organized today by the Aspen Romania Institute.

"Overall, the global economy is in a better place than it was a year ago. But a major challenge has arisen - inflation. Inflation is rising rapidly around the globe and could slow the economic rebound and determine tighter monetary and tax conditions that could impact the most vulnerable social groups. If we look at the factors that drive this rise in inflation, they are of a transitory nature: the decline in inflation in the previous year, the recovery of demand - which wasn't caused by higher incomes but by higher income availability - the congestion of supply chains, the delay in deliveries - all these are not permanent - but also by the major increase in energy prices, especially for gas. Another argument for the transitional nature of inflation is the very success of fiscal support packages, which have helped limit economic losses much faster than in previous crises; thanks to these support packages, the surplus savings accumulated during the crisis now turn into consumption, but this phenomenon won't have long-term effects, as the amount of savings is limited. Therefore, the inflation growth rates are expected to only be temporary," Liviu Voinea explained.

On the other hand, the IMF representative pointed out that the uncertainties regarding the fiscal projections, Romania's included, remain unusually high.

The IMF senior advisor said that fiscal support measures intended to limit the economic effects of the pandemic cannot be granted indefinitely, so that such support measures should be better targeted to those who really need them.

According to the cited source, a return to the pre-pandemic debt level would require more serious fiscal balances than those before the pandemic.

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