Analysts See Romania's 2010 CPI At 7.9%-8%

Analysts polled by MEDIAFAX see the monthly inflation at 0.4%-0.6% in December, while the annual consumer price index accelerated to 7.8%-8.1%, from 7.7% in November.

The inflation came in much higher than the central bank's targeted interval of 3.5% plus/minus one percentage point, after the government raised the value added tax level by 5 percentage points to 24% in early July.

Moreover, some analysts expect the central bank is to miss the 2%-4% target range this year as well, on higher food and energy prices and other tax increases.

They predict the annual inflation will hover around 7% in the first half of 2011, and will gradually decrease towards 3.3%-4.8% in December.

"Monthly CPI was 0.4% in December 2010, and the annual inflation stood at 7.9%. In January to June, inflation should stay at 6.5% to 6.9%, and later decrease to 4.8% by December," said ING Bank Romania's chief economist Nicolaie Chidesciuc.

According to the ING official, the current forecast could be affected by food price pressures, which continues in the first half of this year, imported inflation, as well as potential tax hikes and shifts in regulated prices, such as those of natural gas for households.

Chidesciuc added that inflation cannot be low and stabilized within the next 5 to 10 years, since the economy is undergoing convergence towards the European Union.

"Romania's inflation needs to be 1.5-2 points above the euro zone inflation, namely at 3.5%-4%. Setting more ambitious targets would hurt the economy," Chidesciuc said.

UniCredit Tiriac Bank chief economist Rozalia Pal said monthly inflation was at 0.6% in December last year, while annual inflation reached 8%. She expects annual inflation to reach 4.2% by December this year.

"The factors that determined higher consumer prices were not under the central bank's control," said Pal, citing the reduced supply of food products and the increasing oil prices.

BCR's chief economist Lucian Anghel sees the 2010 inflation at 7.9%-8.1%, adding the indicator should drop to 4.3% by the end of 2011, slightly above the central bank's target.

"If inflation overshoots the central bank's target again, this will happen because of the regulated prices and hiked excise duties," Anghel said.

On the other hand, BRD chief economist Florian Libocor and RBS chief economist Florentina Cozmanca said the annual inflation rate will be on par with the central bank's expectations this year.

"Monthly inflation reached 0.4% in December and the annual inflation reached 7.85%. Annual inflation will peak in the first quarter of 2011. Throughout the year, inflation should drop close to 3.5%," Libocor said.

Cozmanca sees the monthly inflation at 0.53% and the annual inflation at 8% in December 2010.

"Annual inflation should reach 3.3% by the end of this year, after hitting 6.9% to 7.3% in the first half. Risks come from regulated prices, international price evolutions and food prices," Cozmanca said.

Annual inflation overshot the central bank target intervals by 1.5 points in 2007 and 2008, reaching 6.5% and, respectively, 6.3%. In addition, inflation in 2009 overshot the central bank target range by 1.2 points, to 4.74% in December.

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