Dan Suciu, BNR: Food prices are no longer rising, pressure is coming from energy. Inflation heading towards 6%

Inflation will continue to fall, and Romanians will begin to feel the effects from the second half of this year, Dan Suciu, spokesman for the National Bank of Romania (NBR), said on Friday on Digi24. According to him, the pressure on prices is no longer coming from food, but from the energy sector.

NBR Governor Mugur Isărescu has identified five major risks for the Romanian economy this autumn: the evolution of energy and food prices, political instability, the geopolitical situation, and the risk that the country may fail to absorb the European funds available through the NRRP.

When asked which of these risks is the most serious, Dan Suciu said they can be divided into two categories: risks over which Romania can exert influence, and external risks to which the economy must simply adapt.

"It's difficult to say. Particularly since some are entirely beyond our control, which makes it very hard to assess their potential impact on us. It's clear that we cannot influence a geopolitical risk — we can only accommodate ourselves to it, adapt. On the other hand, others genuinely depend on us, from the risk of having an unstable government or failing to overcome this period of political instability, to the one related to the absorption of European funds," the NBR spokesman explained.

"So I would classify them into two categories: those that depend on us — on the capacity of our institutions and our political-economic system to help overcome a crisis — and those that do not depend on us and to which we must adapt. The energy shock falls into this latter category, ultimately, beyond the geopolitical one already mentioned," he added.

Inflation heading towards 6%

The NBR has revised its inflation outlook, after economic developments this year proved less favourable than the central bank had anticipated. Dan Suciu cited among the causes the conflict in the Middle East, rising fuel prices, and problems in the energy sector.

"Yes, unfortunately these were not anticipated even at the start of the year, when our forecast was far more optimistic — and I think we all know what happened. We had a conflict in the Middle East, with regard to the risks we can only manage through adaptation, which led to spectacular increases in fuel prices. We have an energy crisis that we were not prepared to face. Unfortunately, it has manifested both in the hydro sector and in nuclear," said Suciu.

According to him, energy price rises have fed through across multiple components of the economy: "We have higher energy prices, which have affected the entire year across various components — fuel, electricity, and gas alike. And all of this has resulted in inflation rates higher than those forecast."

Nevertheless, the NBR is already seeing a sharp decline in the inflation rate. "What is certain, is certain. We are seeing a drastic fall in inflation. The first step already happened last month, August will be the same — a significant step. We will no longer be talking about inflation approaching 9 or 10%; we are talking about inflation heading towards 6%, possibly even lower if energy policy matters are managed correctly and no further tensions emerge," Suciu stated.

One of the factors contributing to the reduction in inflation is a decline in consumption — a development with less favourable consequences for the economy and the population, according to the NBR representative.