By Adam Brown
April 10 (Bloomberg) -- Romania’s inflation rate fell in March, as tighter credit, slower wage gains and rising unemployment curbed consumption and economic growth.
The rate slowed to 6.7 percent from 6.9 percent in February, the Bucharest-based National Statistics Institute said in an e-mail today. That was above the median estimate of 6.5 percent in a Bloomberg survey of nine analysts. On the month, consumer prices rose 0.5 percent, compared with a gain of 0.9 percent in February.
“The figure confirmed our view of disinflation resuming, though this is another number above market expectations,” Nicolaie Alexandru-Chidesciuc, senior economist at ING Bank Romania, said in an e-mail today. “We can’t expect a significant easing in monetary policy during 2009.”
Romanian economic growth, the fastest in the European Union last year at 7.1 percent, has slowed sharply and the International Monetary Fundpredicts the economy could shrink 4 percent this year because of the global financial crisis.
Romania agreed to a 20 billion-euro ($27 billion) IMF-led financing package last month to help stimulate growth and finance its current-account and budget deficits. Central bank Governor Mugur Isarescu said the loan may be enough to avert a recession.
Prices of food, tobacco and alcohol increased an annual 5.7 percent in February, while prices of other goods increased 6.7 percent, the institute said. The price of services rose 8.8 percent on the year.
Private debt growth slowed to an annual 30.7 percent in February from as fast as 65 percent last June as interest rates increased and banks tightened credit conditions, curbing a four- year-old consumption boom that fuelled economic growth.
Unemployment also jumped to a three-year high of 5.6 percent in March from a 16-year low of 3.8 percent in the middle of last year and wage growth slowed to an annual 19 percent from as much as 25 percent last year.
The drop in consumption spurred an annual 36 percent decline in imports in February, while industrial sales shrank almost 21 percent and producer prices rose 6.2 percent, the slowest gain in more than a year and a half. Retail sales fell an annual 7.9 percent in February, the institute said today in a separate report.
Inflation had accelerated from December through February as the leu weakened more than 13 percent against the euro on the year, raising prices of imports and other goods and services that are gauged in euros and paid in lei in Romania.
Accelerating inflation had prompted the central bank to leave its main interest rate at 10 percent, the highest in the EU, in a meeting on March 31. It warned of “the need to maintain a prudent monetary policy.”
The central bank cut its key interest rate on Feb. 4 by a quarter-point to 10 percent, the first reduction in more than 18 months, after raising it seven times in 15 months.