Economic analysts issue rather gloomy forecasts

The pace of Romania’s inflation rate should slow down in March, but is expected to rise again in April, due to the new energy price increase, outlining the analysts’ pessimism regarding the inflation rate evolution for this year, reads a Reuters report.

The survey, based on forecasts issued by ten economic analysts, says that the inflation rate will stand at 2% in March, down from 2.3% in February, but warns that it will reach 2.5% in April, following the 6% increase in the energy price.

The official data regarding March inflation rate will be released on April 10, but analysts are ever less convinced that it will be kept under control with a view to reaching the annual 25% inflation rate target.

“The estimates for April point out that the price of energy and other products will increase,” analyst Raluca Nicolescu said. The interviewed analysts forecast a 31% inflation rate for 2001, against 29% as estimated in a similar report drawn at the beginning of the year.

The analysts’ opinion reveals a conservative attitude towards the ability of Bucharest authorities to implement the necessary strategies in the fiscal, structural and salary fields, in order to cut the inflation rate. They also forecast a 3.1% economic growth this year, against 4.1% as targeted by the officials.

Romania’s exports have buoyed since last year, after a three-year recession. The 1.6 % GDP growth over the entire 2000 was lower than the 2% level estimated on the market, therefore analysts are still cautious as for this year’s economic performances.

Forecasts regarding the trade deficit over the first quarter of this year were adjusted, from 327 million dollars to 427 million dollars, due to the 157 million-dollar deficit registered in January. The annual trade deficit was estimated to stand at 1.8 billion dollars, up 1.475 billion dollars against initial forecasts.

“Analysts expect imports to increase following the incentives granted to the small and medium-sized enterprises and because of the structure of this year’s budget, which aims at attracting more investors,” Nicolescu added.

As for the domestic currency evolution, analysts forecast a gradual devaluation to 28,146 lei/dollar at the end of April and 32,962 lei/dollar at the end of the year.

“Domestic currency devaluation might stand below the inflation rate, as it is quite likely for the exchange rate to be used as an instrument to push down the inflation rate,” Radu Craciun, analyst with ABN AMRO Romania, maintains.

Analysts consider that interest rates for state bonds aimed at the population will decrease to 41.3% by the end of this year, against 43.7% in June and 49% at the moment.

Although interest rates will be posting a downward trend, they will overrun the estimated inflation rate, revealing the uncertainties connected to getting foreign financing needed to cover the 2001 budgetary deficit, of which 65% will be covered from foreign sources, as planned by the Government.

The budget draft, currently discussed by Parliament, considers a 25% inflation rate and 4.1% economic growth this year. Mediafax