Inflation misses target by very slight margin

Inflation concluded 2003 at 14.1%, if calculated December to December, down from the 17.8% in late 2002, though a little above the official target.

The disinflation target was attained due to the lower inflation in December last year, 1.2%, the National Statistics Institute (INS) notes. The highest price increases in the last month of 2003 were those registered for foodstuffs, 1.8%, while service tariffs rose 1.1% and non-foodstuffs became 0.5% more expensive.

According to INS, eggs saw prices up 12.9%, while bread cost 3.4% more due to the increase in the flour price by 5%. The price of potatoes was 2.9% higher. At the same time, the water, sewer and sanitation services witnessed a 2.4% rise in prices, while urban transportation cost 1.9% more.

Services registered the highest price increase, 15% for the full year, above the 14.3% increase for non-foodstuffs, and 13.7% for foodstuffs. INS says the average monthly inflationary rate went down to 1.1% in 2003 from the 1.4% a year ago.

The inflation calmed down despite the fast ROL depreciation against the euro and the peaks reached in September and October, which the Central Bank counteracted by raising its intervention rate by three percentage points. The inflationary tensions last fall made independent analysts estimate 14.3-14.4% inflation for the end of the year.

Even Finance minister Mihai Tanasescu was estimating 14.2-14.3% inflation three days ago. The latest forecast of the National Bank was 14.1% precisely, though.

The National Statistics Institute in 2003 was again unable to put an end to those speculations about how inflation was calculated, that is the structure of the goods and services basket considered. Subsequently, even though it was theoretically possible to attain, a 14% or even a 13.9% inflation would have added more fuel to the fire of the suspicions about how relevant this indicator is for the actual developments in the economy. The authorities can therefore boast they have attained a major macroeconomic target, following the slippage registered by the foreign balance.

The 14.1% inflation was attained against a 17.74% nominal depreciation of the ROL against the EUR in 2003. Albeit lower than in 2002, the inflation decline in 2003 is one more step towards brining this indicator down to less than 10%.

Romania is the last of the EU accession applicants that needs two digits to express the inflationary rate, a negative aspect that contributed to it not getting the functioning market economy status from the European Commission in 2003 again.
razvan.voican@zf.ro