Mugur Isarescu, governor of the National Bank of Romania (NBR) claims the economy is registering certain "skids" and says it is the Government's job to take the appropriate steps. The incentives granted by the Government led to an increase in imports and the current account deficit was soon to catch up.
"At this moment, I see no correction measures other than those about tempering the appetite for imports, both specific and general, the Romanian economy is showing, as well as giving up every measure that may discourage exports," Isarescu explained.
He specified that the National Bank of Romania and the Government representatives had considered a series of measures the Cabinet was to pass in order to temper the increase in imports. "The decision is up to the Government now," NBR governor said.
The Romanian economy is going in the right direction, but the accentuation of certain fundamental imbalances will entail recoveries, which could cast a doubt on both the credibility of the economic programme and on its sustainability, Isarescu stated.
He says an overheating of the economy was out of the question, but warned that the possible imbalances could damage the credibility of the governmental policy.
"The warning signal was sent out in due time, and the economy is not overheated in general terms. It is, however, in danger of skidding, if correction measures are not taken in good time."
Leonard Cazan, Development Minister on Monday said an economy overheating was out of the question.
Romania over the first five months this year exported $4.67bn in goods, while imports reached $6.43bn, that is $1.65bn more than in the year ago period.
Under the circumstances, the governor said that monetary policies must not be exclusively directed to fighting inflation. "We will continue to use the exchange rate as a correction tool as little as possible," Isarescu said.
Furthermore, in case there are problems, the governor feels a solution would be to visibly attenuate the appreciation of the ROL against the USD, calculated as a margin of the nominal depreciation of the national currency and the inflationary rate. The ROL has gained 3.5 - 4% against the USD in real terms since early this year.
"We will not allow the exchange rate's appreciation to go beyond the moment when its trend could discourage exports and stimulate imports. The current level is good, though," the governor concluded.
According to NBR's preliminary data, Isarescu estimates the inflationary rate in July not to exceed 1.7%, which will lead to a twelve-month (July 2000- July 2001) inflationary rate of 32 - 33%. "This is a positive signal showing we are headed towards the 29 - 30% annual inflationary rate," the governor said. The annualised inflationary rate throughout June 2000 - July 2001 amounted to 35.7%.
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