The Romanian central bank BNR has reviewed its inflation forecast for 2007 by 0.2 percentage points from 3.7% in May to 3.9%, BNR governor Mugur Isarescu announced on Monday. BNR, however, reviewed its inflation forecast for 2008 downwards, from 4.2% to 3.7%.

A BNR report shows that the annual inflation rate in June stood 0.5 percentage points above the level of May 2007. The trend was set as prices grew at a higher pace than previously forecast, mainly because of a growth in rent prices as set by local administrations, volatile prices for several food products as a result of drought and because of higher oil prices on international markets.

The lower forecast for 2008 was determined by expectations of a lower amplitude of changes to managed prices.

According to the BNR, salary boosts, a more relaxed fiscal policy coinciding with higher pressures on public spending in a time of elections and a deeper current account deficit count among the main inflationary risks.

In a press conference today, BNR governor Isarescu said that growing pensions as announced by the government would not affect the economy because growing salaries would generate a significant income growth for the state budget, according to the NewsIn news agency.

He said growing salaries, however, are so consistent that pension rises would prove no problem at all. But he said that income policies in general are unsustainable on the long term and may prove a real risk of inflation.

According to the National Statistics Institute - INS, the net average salary advanced to 1023 RON in June this year, up 1.1% compared to the previous month and 22.5% higher than the same period last year.