The Government's baseline scenario remains an economic growth of 0.1% this year, but achieving this target depends on economic developments in the third and fourth quarters, while the disinflation process is expected to begin in August-September, interim Finance Minister Alexandru Nazare said.

'The baseline scenario remains an economic growth of 0.1% this year, but achieving this target depends on economic developments in the third and fourth quarters. We are relying in particular on a good agricultural year and the continuation of the very strong pace in construction, a sector currently recording growth of around 14%. Despite multiple shocks, Romania's economy has proven resilient, and this is primarily due to the seriousness of entrepreneurs and the legitimate business environment,' the minister wrote on Facebook.

According to him, the disinflation process was delayed by external developments, but the direction remains downward.

'The disinflation process is estimated to begin in August-September. The international context, including the conflict in Iran and its effects on energy and fuel prices, has delayed this process. The current estimate is an inflation of 5-6%, rather than 4% under the initial scenario, however the direction remains downward. As inflation declines, we expect a gradual recovery in consumption towards the end of the year, particularly in the fourth quarter, against the backdrop of a more favourable base effect and a moderation in price growth,' Alexandru Nazare mentioned.

The Finance Minister said that a confirmation of the disinflation process and keeping the deficit within the agreed limits could create the conditions for interest rate cuts.

'If the disinflation process is confirmed and the deficit remains within the assumed parameters, we have the conditions for a slight reduction in interest rates. At the same time, we remain cautious, as financing costs are influenced both by the international context and by the level of the deficit and public debt. At the end of June, interest expenses were approximately 4 billion lei above last year's level,' he explained.

Regarding fiscal policy, Nazare said that the Executive is maintaining its objective of reducing the budget deficit and continuing public investment.

'We are maintaining the forecast for deficit reduction within the assumed targets, through a serious and responsible approach to the management of public funds. Fiscal consolidation is essential for reducing financing costs and increasing investors' confidence. We are continuing public investment at a sustained pace, with an additional 9 billion lei in the first six months, supported including by the accelerated implementation of projects financed through the PNRR [National Recovery and Resilience Plan]. These investments support economic activity and create the conditions for a recovery in growth,' the minister mentioned.

He underscored that the maintenance of Romania's sovereign rating by Fitch contributes to strengthening investors' confidence.

'We managed to maintain Romania's sovereign rating in Fitch's first assessment this summer, at an important moment for the country's credibility on international financial markets. This result contributes to maintaining investors' confidence and the stability of state financing. We are continuing with the same seriousness to use all available arguments in our discussions with Moody's and S&P, in order to protect Romania's rating interests,' Alexandru Nazare said.

Regarding the prospects for next year, the minister said that there are grounds for an acceleration of economic growth if fiscal consolidation measures and investments continue.

'If we continue fiscal consolidation, maintain the pace of investments and make use of European funds, there are solid grounds for a more consistent economic recovery as of next year. The international economic context remains volatile in the period ahead and it is essential to maintain a prudent approach. The indicators we constantly monitor show that there are real grounds for a gradual improvement in the economic situation in the coming period,' the Finance Minister conveyed.

He added that discipline in the management of public funds is essential for fiscal consolidation and for improving the competitiveness of the economy.

'We cannot demand discipline from the private sector without demonstrating discipline in the management of public funds. This is the principle that must underpin the period ahead. Fiscal consolidation is not an end in itself nor a technical exercise, but the necessary condition for a more stable economy, lower financing costs and a more competitive business environment,' Alexandru Nazare concluded. AGERPRES (RO - writing by: George Banciulea; EN - writing by: Rodica State)

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