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BCR chief economist: Fuel duty rise could add about 0.4 percentage points to inflation

The rise in the fuel excise duty could increase the inflation rate by about 0.4 percentage points and there is also the risk of electricity tariffs increasing further, however the impact of these factors could be offset by the evolution of food prices, vegetables and fruit in particular, BCR chief economist Horia Braun told Agerpres.

"So far we haven't revised our estimate for the year-end inflation rate, which we further project at 1.9 percent. Despite the announced increase in the fuel excise duty that could add about 0.4 percentage points to the inflation rate, and the existing risk of electricity tariffs rising further, based on the currently available data, it seems that the evolution of food prices, vegetables and fruit in particular, could be such that they might partially offset the impact of the aforementioned inflation factors. It remains to be seen, however, whether a rise in fuel prices won't unrelentingly roll along the entire cost chain, considering that, for instance, in the case of foodstuffs, transportation costs have a significant share in the selling price. In conclusion, for the end of 2017 we forecast an inflation of 1.9 percent, unchanged, but to this projection we attach growing risks of an inflation rate by about 0.2 — 0.3 percentage points higher," Braun explained.

Earlier this month the National Bank of Romania (BNR) upwardly revised its year-end inflation forecast to 1.9 percent from the previously estimated 1.6 percent.

For the end of 2018, the BNR estimates an inflation rate of 3.2 percent, compared to the previously forecast 3.1 percent, and for mid-2019 it expects the inflation rate to be 3.5 percent.

Bank financial analysts expect the annual inflation to reach 2.13 percent at the end of 2017 and 3.3 percent at the end of 2018, as all the analysts polled in an internal survey conducted within the Romanian Association of Financial — Banking Analysts (AAFBR) pointed to an increase in inflation forecasts by the end of this year and beyond.

In their answers, the interviewed experts put the annual inflation rate at 2.13 percent at the end of 2017 and 3.3 percent at the end of next year, marginally above BNR's latest projections of 1.9 percent for the end of 2017 and 3.2 percent for the end of 2018 (AAFBR mentions that the central bank's estimations do not include the impact of the increase in the fuel excise duty which will come into effect in September 2017).

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