Isărescu: Economy will recover after public sector redundancies
The National Bank has no room to cut the key interest rate on
RON-denominated loans, and prospects are not very encouraging,
either, Governor Mugur Isărescu suggested at the presentation of
the Report on third-quarter inflation. The NBR last cut the key
interest rate this summer, to a 6.25%-a-year an all-time low after
the Government raised the VAT from 19% to 24%, although the economy
has yet to rebound after two years of recession.
Isărescu yesterday talked about a "significant" demand deficit,
which will extend beyond the summer of 2012, according to the NBR's
current projection, thus helping the NBR fight inflation. However,
the governor said economic growth would be resumed in a "healthy
manner", by means of a public sector adjustment, which has started
being operated via redundancies and salary cuts. He also renewed
criticism of those demanding action from the central bank, i.e. a
relaxation of the monetary policy in order to help the
economy.
"Adjustments continue on the labour market. They are not limited to
the private sector, they are also present in the government sector,
with a certain delay, but they do exist. This will help resume
economic growth on a sustainable base," Isărescu said.
The governor names the press as one of the factors keeping
inflation high despite the decline in the population's purchasing
power, because expectations of price increases are fuelled by news
stories, with consumer confidence also being affected.