Recession and the lack of budget balance cannot be solved simultaneously and Romania can't overcome recession this year, Romanian National Bank (BNR) governor aide Adrian Vasilescu has said. He said psychological and emotional issues will have an impact as rising VAT and lower salaries for 1.4 million people will have a negative influence on consumption.
He said "psychical, emotional issues" will change the market and consumption throughout the year. According to Vasilescu, inflation has a structural component, a corrective one (22% of inflation is caused by managed prices) as well as an emotional component.
He said an inflation forecast by BNR and the IMF was done arithmetically by adding up the impact of a VAT increase - without the psychological component, which would limit price rises while inflation would be kept below 8%.