Central Bank Governor: We still worry about the growth of income and the dependence on currency exchange rates

The Romanian Central Bank (BNR) is still worried about the inflation pressure determined by the income growth in 2008, mainly in the second half of the year. Another reason to worry is the fact that prices highly depend on the currency exchange rate, said the BNR Governor, Mugur Isarescu, on Friday. The inflation target, Isarescu said, remains 4.5% for 2009. „The exchange rates may mess any estimations we make on the inflation rate”, said Isarescu.

According to Isarescu, there are three factors that may determine a general decrease of prices: the oil price decrease, the good year for agriculture and the fact that there is no more excessive demand.

Main statements made by Isarescu, in brief:

– The inflation target for 2010 is 3.5%;

– We wait for the budget to be approved, before discussing firm figures;

– Any projection we make is marked by major incertitude;

– The 2% budget deficit is hard to reach.

There are supplementary risk factors, compared to previous estimations:

– The situation of foreign financing and the lack of financial resources;

– The rift between productivity and wages will not be corrected soon;

– We have doubts with the way our income policy will be applied, even though there are signals from the corporate segment, but we are not sure the fast pace of productivity growth of the last few years will be maintained;

– The private sector is getting tired in front of the competition;

– The RON / Euro exchange rate depends also on what happens on the international markets;

– The crisis is still fully developing and difficult to anticipate;

– The Romanian banking system is solid and not only will it be lacking problems, but it will also be a recovery anchor;

– We still believe that the effects of the crisis on Romania will be limited and we haven’t noticed an exposure of the Romanian banks to toxic assets.