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| The State of the Romanian Economy |
| (2011-10-12) |
| Last updated: 2011-10-13 13:42 EET |
The month of September saw the lowest inflation rate in 21 years. The National Statistics Institute announced a 3.45% rate, within the range set by the Central Bank for this year, following a drop in consumption prices for four months in a row, due to foodstuffs getting cheaper. The drop in the inflation rate is largely the effect of the drop in the prices of fruit and vegetables. Economic analyst Laurian Lungu believes that this trend will disappear in the coming months:
Laurian Lungu: “In the coming months energy and natural gas prices will go up. Also, this winter some subsidies will disappear, so household costs may increase in certain areas. The seasonal effect that pulled inflation down is very likely to wane, so we will probably see prices going up in the coming months. The question is how high this increase is going to be.”
The drop in the inflation rate had been anticipated. It was actually announced last week by the Governor of the National Bank of Romania, Mugur Isarescu, who warned however that the downward trend could be offset by fears of rising inflation. For this year, the Central Bank targets a 2-4% inflation rate, but the forecast is slightly higher, standing at 4.6%.
The chief economist of the Central Bank, Valentin Lazea has recently stated that Romania has a historic opportunity to reduce the inflation to a rate of under 3% in the coming years, which is only possible if the central bank’s monetary policy is supported by fiscal and salary policies. The Vice-governor of the central bank, Cristian Popa, has stated that the inflation rate will again join the target range set for this year, and next year it will also be close to the set target. This very much depends on the evolution of the leu – euro exchange rate, on the prices of electricity, gas and heat, which account for almost one third of the basic product and service basket.
In another move, Finance Minister Gheorghe Ialomitianu has announced that Romania’s economic situation is good, which may ward off a new recession, but it all depends on what’s going to happen to the economies of Greece, Italy, Spain, Portugal and Ireland, affected by the debt crisis. It is precisely because of the current economic situation at global level, and in Europe in particular, that Romania’s growth forecast of 3.5 – 4%, established together with the IMF, will be modified, the Finance Minister also announced.
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