Central bank admits to underestimating the depth of economic collapse

The NBR (Romanian central bank) warned about the various risks facing the economy and about the looming adjustment, anticipating that the tide would turn, but even it underestimated the magnitude of the decline, says governor Mugur Isarescu. "For the NBR it was not a novelty that the tide would turn. We warned about the exaggerated salary rises, above productivity. But the sheer size of the decline was underestimated, even by the NBR. I have to say I was not able to anticipate the magnitude of the adjustment." He specified that the amplitude of the adjustment makes the difference between soft and hard landing, with the financial crisis causing the adjustment to come earlier and quicker. "I don't think we would have awakened to reality had it not been for this severe shock. The crisis acted both as a trigger and as an accelerating force." This is the first time that the central bank openly admits to having underestimated the size of the economic fall. If one looks at the economic decline in Romania, this is hard landing we are talking about, but this is not so much the case as far as the unemployment rate is concerned, he explained.