Friday, December 10, 2010

Romanian Inflation Slowed in November for First Time Since June

Romania’s inflation rate dropped in November for the first time in five months as weaker demand partly offset the effects of a 5 percentage-point increase in the value-added tax from July.

The rate fell to 7.7 percent from 7.9 percent in October, the Bucharest-based National Statistics Institute said today in an e-mail. On the month, prices advanced 0.5 percent. The median estimate in a Bloomberg survey of seven economists was for annual inflation of 7.8 percent.

Romania, which turned to international lenders for a bailout last year as a recession eroded budget revenue, raised the VAT to 24 percent in July to meet a budget-deficit target of 6.8 percent of economic output this year and 4.4 percent in 2011. It got a 20 billion-euro ($26.5 billion) bailout from the International Monetary Fund and the European Union.

“Pressures coming from food inflation probably grew in November, but less leu weakening versus the euro and no major hikes in regulated prices would justify a slowdown in the monthly rate of inflation to 0.5 percent from 0.6 percent,” ING Bank Romania SA analysts led by Nicolaie Alexandru-Chidesciuc wrote in a note to clients before the inflation data release. “Such an outcome would imply year-end inflation below 8 percent versus 8.2 percent expected by the central bank.”

The central bank on Nov. 4 raised its 2010 inflation forecast to 8.2 percent and to 3.4 percent next year. That compares with August estimates of 7.8 percent and 3.1 percent respectively.

Food-price inflation accelerated to an annual 6 percent in November compared with 5.5 percent in October, the institute said. Prices for services rose an annual 6.1 percent and non- food prices gained 9.7 percent, compared with 10.6 percent the previous month.

To contact the reporter on this story: Irina Savu in Bucharest at isavu@bloomberg.net.

To contact the editor responsible for this story: James M. Gomez at jagomez@bloomberg.net

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