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The latest developments in high frequency indicators show a more consistent recovery of the economy in the third quarter than previously anticipated, although uneven from a sector perspective, reports the National Bank of Romania.
“The latest developments in high-frequency indicators show a recovery of the economy in the third quarter that is more consistent than previously anticipated, although uneven from a sector perspective. Thus, in July-August, retail and auto sales returned to positive territory as an annual dynamic, approaching the volumes of February or even exceeding them, while the annual variation of the services provided to the population remained negative, decreasing by one third with respect to the previous quarter. Construction activity accelerated slightly and Industrial production and new orders in manufacturing recovered much of the decline in the second quarter, while net foreign direct investment fell sharply in July-August, compared to the same period. At the same time, the annual dynamics of the trade deficit reappeared in September, after buying the first two months of the third quarter ”, is reflected in the NBR statement sent after the Board of Directors meeting on monetary policy issues.
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According to the cited source, financial conditions continued to improve, under the impact of the three successive drops in the monetary policy interest rate and in the context of the liquidity provided to credit institutions by the central bank, which will probably allow an adequate financing of the real economy and the budget sector. , under conditions of relative stability of the leu / euro exchange rate.
The institution mentions that maintaining confidence in the national currency, in the context of the deepening of the twin deficits, is a central element in the conduct of monetary policy this year, which implies a gradual and sustainable reduction in interest rates in the money market and loans in lei. The main prices of the interbank money market have continued their downward trend in recent months, although relatively slowed down and recently marked by some small fluctuations, and yields on public debt have prolonged their downward movement until reaching the minimum values of the last ten years. 4 years. For its part, the average interest rate on new loans to non-bank clients continued to fall in the third quarter, falling to its lowest level in almost the last 3 years.
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According to the NBR, recent fluctuations in the leu / euro exchange rate, driven by growing global risk aversion in the context of the worsening pandemic crisis, but also by domestic policy decisions that pose risks to the sustainability of finances public, have been significantly more modest than in the region.
Likewise, the Central Bank indicates that the annual dynamics of credit to the private sector increased slightly in September, after the change of course in August, reaching 4.0%, from 3.6% in July, under conditions of reactivation. lei loans, especially in the non-financial business segment, also supported by the SME Invest Romania program. The total proportion of loans in lei increased to 68.8%, which represents the record for the period after January 1996.
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At Thursday’s meeting, the NBR Board of Directors reviewed and approved the Inflation Report, November 2020 edition, which incorporates the latest data and information available.
“The new scenario partially reconfirms the inflation outlook highlighted in the previous forecast, given the important downward revision of the anticipated trajectory of the annual inflation rate only in the short term. Therefore, the inflation rate is expected to continue to decline in the near future. significantly lower than previously anticipated, but then increase and remain on the horizon relevant to monetary policy in the vicinity of the target point, similar to previous forecasts, but the adjusted CORE2 inflation outlook is adjusted fully reconfirms slightly at the end of this year, but then much more consistently, falling in the second half of next year and then remaining slightly below the center point of the target, amid the disinflationary effects of the aggregate demand deficit “the statement said.
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The new Quarterly Inflation Report will be published on November 13, 2020 at 12:00 hours. The minutes of the deliberations on the adoption of the monetary policy decision during Thursday’s meeting will be published on the NBR website on November 24, 2020 at 3:00 p.m.
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