Romania’s economy faces real risk of overheating, central bank vice governor warns

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The economic growth in the first quarter this year seems to exceed the potential advance of the gross domestic product which makes real the peril of overheating especially in an election year, the central bank’s vice governor Eugen Dijmarescu warned.

Data on the gross domestic product (GDP) growth in the second and third quarter will show whether the first quarter growth stemmed from investments too or only from consumption, Dijmarescu said.

In the event the danger of overheating of the economy proves real chances to cut the monetary policy rate by the end of the year will shrink significantly.

Slim chances to reduce the monetary policy rate this year

The central bank’s governor Mugur Isarescu has repeatedly tackled the possibility to cut the monetary policy rate this year on curbing inflation.

Moreover, a good year in agriculture, unlike the past one when crops were destroyed by the summer drought, would reduce reasons to further increase the rate.

Romania’s GDP in the first quarter advanced 8.2 percent to 86.7 billion lei beating analysts estimates of 7.4 percent, the country’s Statistics Institute said in an e-mail on June 2.

The monetary policy rate is currently of 9.75 percent per year after five successive hikes since October last year.

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