The consumer price inflation will peak in April (11.2%), once the support schemes for household users of electricity and natural gas have expired, to remain close to the double-digit area at the end of the year (9.6%), under the baseline inflation scenario unveiled by the National Bank of Romania (BNR). But it will subdue quickly and enter the target inflation band at the end of 2023, the central bank expects, according to Romania-Insider.com.
Widening the scope of the forecast from just inflation, BNR warns that large and persistent hikes in energy commodity prices pose relevant risks to economic activity as well.
Downside risks to economic activity and upside risks to price dynamics are seen prevailing further. Moreover, should such woes persist, this would weigh on the trajectory of macroeconomic variables over a longer horizon, BNR’s Inflation Report reads.
The lack of clarity about the compensation schemes the Government may prolong opens the door to alternative scenarios. BNR investigates the implications of a hypothetical scenario assuming a 3-month extension, until 30 June 2022, of the current price ‘cap and subsidy’ scheme for electricity and natural gas consumption, finding that the path of the annual CPI inflation rate would run in the short term below that in the baseline scenario, and the peak would be reached with a one-quarter lag.
From a broader perspective, we find particularly relevant the relative prices of the energy inputs that will be established in Europe and Romania after the equilibrium is reached supposedly by the end of 2023. Under the baseline scenario, they will be significantly higher compared to the period before the inflationary shock.
Read more HERE
