Romania ’09 Inflation To Exceed Again Ctrl Bk’s Target - Analysts

The analysts believe the inflation will most probably range within the variation interval set by the central bank for 2010.

In 2007 and 2008, the annual inflation exceeded by 1.5 percentage points the upper limits set by the central bank, as it was of 6.5% and 6.3%, respectively, at the end of the year.

Romania's central bank targets an annual inflation of 3.5% at the end of December, with one percentage variation band around the target. A similar objective was set for 2010.

The bank has recently revised its forecast on the 2009 inflation rate to 4.5% from 4.3% previously envisaged.

The analysts interviewed by MEDIAFAX forecast an annual inflation of 4.7% or 4.8% at the end of December, while most of them see the 2010 inflation ranging within BNR's target interval.

Ionut Dumitru, the chief economist with Raiffeisen Bank Romania, BCR's chief economist Lucian Anghel, as well as RBS Romania's economist Catalina Molnar all forecast an inflation rate of 4.8% at the end of December, while Nicolaie Chidesciuc, senior economist with ING Bank Romania, sees the rate at 4.7%.

The higher inflation in 2009 is due to factors the central bank cannot control such as the higher tobacco excises, according to analysts.

For 2010, the analysts have different opinions on the annual increase of the consumer prices, ranging between 2.8% and 5%, but they all expect a reduction of the key monetary policy rate between 1 and 1.5 percentage points, from the current 8%.

Also, the main factors that could impact the inflation in 2010 are out of the central bank's control, such as the excises level, the international oil prices and the weather conditions, while the leu exchange rate might also have an important effect on the consumer prices.

Dumitru sees the annual inflation touching a high in January and then gradually reducing to 3.5% towards the end of the first half, before rising again to 4% at the end of 2010.

BCR's chief economist forecasts the annual inflation will set at 4.8% in 2009 and at 4.5% in 2010.

Anghel said the inflation could be more stable compared with previous years if taxes and duties are not highly increased.

Chidesciuc is the most pessimistic analyst as regards the 2010 inflation, as he forecasts it will be outside the central bank's target interval, due to the administered prices that may rise next year, and the higher excises. He also said the domestic demand might revive, putting pressures on prices.

According to Chidesciuc, a positive influence could come from the leu appreciation against the euro.

He expects the central bank to cut the key rate at 6.75% until the end of 2010.

Molnar is the most optimistic and forecasts an inflation of 2.8% in December 2010, after a high of 4.9% in January. Molnar also sees a 1.5 percentage points cut of the key rate, up to 6.5% in the first year-half.

Romania's CPI rose by 67 basis points on the month in November, driven mainly by higher tobacco and fuel prices, while the annual inflation widened to 4.65%, ending an eight-month deceleration period, according to the National Statistics Institute.

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