Isărescu: Stability is foundation for South-east Europe's growth
Mugur Isărescu, Governor of the National Bank of Romania, emphasized economic stability as the foundation for investment, innovation, and social progress in South-east Europe. Speaking at the Romania Government Roundtable, he outlined current challenges and policy responses.
Navigating global headwinds
Governor Isărescu highlighted the complex international environment, marked by geopolitical tensions, trade disputes, and military conflicts, which redefines the operating landscape for companies and banks.
He emphasized that economic stability is now an active policy objective.
While the Greek and Romanian banking sectors have strengthened and non-performing loans declined, safeguarding financial stability remains challenging amid global shocks like rising energy prices and trade tariffs.
The post-Covid inflationary shock led to forceful monetary tightening cycles across advanced and emerging economies, including South-East Europe, further complicated by the war in Ukraine.
Despite these shocks, monetary policies have been adequate, and inflation has moderated, though it remains vulnerable to renewed supply shocks.
The region's economies are highly integrated into European value chains and the EU Single Market, showing increased cohesion and convergence.
However, fiscal space has narrowed, making the interplay between monetary normalization, fiscal consolidation, and structural reforms more delicate.
Romania's dual mandate
Romania's economy has shown resilience, driven by investment, EU funds, and a robust labour market, despite pressures from past budgetary expenditures.
Yet, structural vulnerabilities persist, including a current account deficit, fiscal imbalances, and sensitivity to external financing.
The National Bank of Romania (NBR) maintains a firm stance to anchor inflation expectations and safeguard financial stability, recognizing the interlinkages between fiscal and monetary conditions.
The NBR's framework prioritizes price stability, which is intrinsically linked with financial stability.
Navigating these trade-offs demands a data-driven, forward-looking approach, public communication, and close cooperation within the National Committee for Macroprudential Oversight.
European-level coordination is also vital.
A clear compass in stormy seas
Isărescu's speech highlights persistent challenges for South-east European economies amidst global turbulence and domestic vulnerabilities.
His emphasis on central bank credibility, consistent communication, and robust cooperation offers a crucial framework for navigating complex trade-offs.
Transforming uncertainty into long-term prosperity hinges on sound policies, institutional strength, and sustained cooperation.