Drought effects as seen by CNP: Economic growth down, inflation up

The forecast for this year’s economic growth has been revised downwards from 6.5% to 6.1%, whilst the inflation rate estimate has been revised upwards from 4.2% to 4.5%, announced the National Forecast Commission (CNP). The reason behind the revision of this year’s macroeconomic targets is the drought, which caused the economy (GDP) to slow down in the first half of the year, and also had a negative impact on indicators. The economic growth forecast was revised downward, from 6.5% to 6.1% after the GDP increased by a mere 5.8% in the first half of the year, below the expectations of both analysts and the CNP. Agriculture, which was the most affected by the drought, expects to register an 11.2% decline this year from a 3% increase forecast in spring, specific for a regular agricultural year. An upward revision was made for the constructions sector, the economy’s most dynamic sector of last two years: from 17.2% (the spring estimate) to 25.2% (the current estimate). Expectations for this year’s inflation have also been modified, from 4.2% to 4.5%, in particular after the strong rise in food product prices in August, as a result of the drought. The annualised inflation (for the last 12 months) stood at 4% at the end of July, but climbed to almost 5% in August. The most dramatic change in the estimates regards the current account deficit, which measures net foreign currency outflows, and was revised upwards, from an estimated 13.35 billion euros (10.3% of the GDP) in spring to 15.8 billion euros (13.4% of the GDP).