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Fall in inflation rate is certain

The annual inflation rate will drop from the peak level of 8 percent reported in December to 6.7 percent in January, is stated in a RAIFFEISEN report on Romania's economic prospects in 2011, "Financiarul" informs. Inflation will fluctuate between 6.6 percent and 7 percent up to June, while July will bring about another significant slump, a little below 5 percent, analysts further say.

According to the latter, the inflation rate is sure to decrease, the only element of uncertainty being the pace at which deflation will proceed. Nevertheless, inflation will amount, at the end of the year, to 4 - 4.5 pc, which is above the central bank's estimate, of 3.4 pc. Furthermore, a climate less fraught with uncertainty, given that the Parliament passed the laws included in the agreement with the IMF, gives the National Bank of Romania ampler room for new measures. Under these circumstances, RAIFFEISEN anticipates the central bank will reduce interest rates by the end of the year from 6.25 percent to 5.5 - 5.75 percent and could decide to reduce reserve requirements for credit institutions.

RAIFFEISEN estimates the RON will continue to be traded in the following months at levels close to the current exchange rate, of approx. RON 4.25/ EUR, namely, RON 4.4 in March, RON 4.3 in June, RON 4.25 in September, to amount to RON 4.2 in December. The economy will grow by 1.5 percent in the course of this year, according to RAIFFEISEN forecasts, which overlap with those of the IMF. The budget deficit target, of 4.4 pc of GDP, is ambitious, but can be met, the main challenge for the Government being to keep a tight rein on expenses, is further stated in the report.


Published on 21.01.2011

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