BNR's Isarescu: The step taken with the fiscal measures is major, must be continued

The step with the fiscal measures that have been taken is major, but it must be continued with measures in the second and third stages amidst political stability and social peace, says Governor of the National Bank of Romania (BNR) Mugur Isarescu.

"They still need to be continued, but the step with the fiscal measures that have been taken is, I think, based on data, the step is major. A major step has been taken. That is why the relatively positive reassessment of the rating agencies. It must be continued with measures in a second stage, measures in a third stage amidst political stability and social peace. I am not talking about social peace as something exaggerated, but about a certain social balance. Of course, the measures are painful and create reactions, but we must understand that they were absolutely necessary and that, as you have seen, the inflationary peak will be over and it could be that at the end of the 12-month period we will enter a period of even stronger, more sustainable economic growth, as happened after 2010, 2011. We had 10 years of economic growth and relatively low inflation," said Isarescu.

Asked by journalists if Romania is close or far from recession, the BNR governor said: "We are not in a recession, but there is such a risk."

"The risk is primarily related to external factors, because a good part of the Romanian industry depends on what happens elsewhere in Europe, and things don't look very good there, and, secondly, by this massive reduction in consumption and domestic absorption. Look at what was in the past, excess demand and now we have a massive shortage of demand. And this reduction in domestic consumption as personal incomes are must be counterbalanced with something so as not to enter a recession. And, as I was saying, the stake is the absorption of European money, the continuation of investment financed by European money to counterbalance that. And then the economy will probably go for at least the next 12 months, with an increase somewhere between 0 and 1%. It's my forecast and I have to tell you that it's based on a personal feeling . We don't have much data to work with for now. And it may be slightly optimistic, but we have to believe it," Isarescu told a news conference where he unveiled BNR's latest quarterly inflation report.