One-digit inflation, big challenge

Curbing inflation below 10% is the biggest challenge of next year, Finance minister Mihai Tanasescu on Tuesday stated. He says the main lever to push inflation down is to proceed with the structural reforms the Government needs to apply.

“The 9% target will be attained through a tighter action on NBR’s part and through the fiscal anchor provided by the budget deficit of 3% of GDP, as well as through a prudent salary policy for the public sector,” Tanasescu says.

Finance minister said the budget and the central bank would switch places next year, with the latter playing “a more aggressive part.” “The central bank’s role used to be secondary thus far, but now it will have to take the lead in controlling inflation, like in any of the neighbouring countries.”

The Government bets on a 9% inflation calculated December to December and on an 11.5% average annual inflation in 2004. Certain analysts are not that optimistic, though, as the first thing they bear in mind is that 2004 is an electoral year, which will make it harder for authorities to deepen reforms.

“We just can’t see how Romania could possibly attain a one-digit inflation next year. This might most likely happen in 2005,” Joan Hoey, analyst for Romania of the Economist Intelligence Unit, a division of British The Economist group told Ziarul Financiar.

Hoey says inflation at this stage is becoming increasingly harder to push down, particularly because a significant price segment in the economy is administratively regulated and will have to keep being updated in line with the ROL/EUR or ROL/USD exchange rate.

The Finance minister says the 2.1% inflation peak in September must not alarm anybody.

“We see further inflation increase in the last quarter, though not as high, so that we would keep within the 14% target,” Tanasescu said. Average inflationary target for 2003 is 15.2%.

Next year’s budget is built around an exchange rate of 36,700 ROL/USD and 40,100 ROL/EUR. razvan.voican@zf.ro