February 9 (SeeNews) - Romania's central bank, BNR, said on Thursday it lowered its 2017 inflation forecast to 1.7% from previously projected 2.1% and said that that it expects changes in its key rate by the of next year.
The lowering of the inflation forecast reflected the effect from the elimination of 102 fees and charges by the government, BNR said in a quarterly inflation report.
Among the fees eliminated as of February are the environment protection fees paid upon car registration, 33 consular and citizenship fees, 20 commerce registry charges, 22 penalty fees for the loss or unlawful modification of documents, 13 stamp duties and permit fees for recreational and sport fishing. The TV and radio fee is the most hotly contested item in the package, with the fee being a big source of financial revenue for state-owned radio and TV broadcasting company SRTV.
Inflation is seen re-entering the central bank's target band of 1.5%-3.5% in the fourth quarter this year. For 2018, BNR forecasts 3.4% inflation.
"On the domestic front, one of the relevant risk factors is the future fiscal and income policy stance. Any deviation from the set of fiscal measures included in the 2017 draft budget on either revenue or expenditure side would have a bearing on public finance sustainability and, implicitly, on the configuration of the baseline scenario underlying the macroeconomic projection," BNR said.
Also, the central bank added, a budget spending composition where capital expenditures would be cut in favour of current expenditures could translate into a less sustainable structure of domestic demand over the medium term.
"This could cause consumer prices to increase faster than projected in the baseline scenario, affecting also the potential growth and the competitiveness of the Romanian economy. Under the circumstances, a general government budget deficit exceeding the 3 percent reference value set forth in the Stability and Growth Pact and, in turn, a worsening external position could prompt foreign investors to reassess the risk regarding the domestic economy," BNR said.
The central bank also pointed out that downside risks to the inflation outlook are, domestically, further attributed to factors beyond the scope of monetary policy.
"In this respect, the uncertainties about the timing of future energy price adjustments remain relevant, against the backdrop of the recent developments – that may persist over the following quarters – in international energy prices, as well as of the competent authorities’ decisions on end-user price components subject to their regulation," BNR said.
Romania's annual inflation rate stood at -0.5% at the end of 2016.
Regarding monetary policy, the bank said it expects changes in its key rate by the end of next year.
BNR maintained on Tuesday its monetary policy rate at record low 1.75%. The central bank last changed the rate in May 2015, when it cut it by 25 basis points.
(1 euro = 4.4956 lei)