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BCR revised down to 0.7pct economic growth forecast for Romania in 2012

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BCR revised down, from 1.3 percent to 0.7 percent, the economic growth forecast for Romania in 2012, BCR Senior Analyst Eugen Sinca told a press conference on Thursday.

Moreover, the economic growth estimation for 2013 was revised down, from 2.9 percent to 1.9 percent.

According to Sinca, the main reason for revising down the economic growth forecast for 2012 is the agricultural crop under expectations, following the severe drought. With a regular agricultural performance this year, the economic growth in 2012 would have reached 1.1 percent.

In the economic growth estimation, BCR also took into account the effects of a slight recession in the euro area.

The BCR representatives underscored that Romania would keep the gap of one percentage point in terms of economic growth against the euro area, same as in 2011, when it registered a 2.5 percent economic growth compared with 1.5 percent in the euro area.

For 2012 the analysts estimate a 0.2 percent economic advance in the euro area.

BCR chief economist Lucian Anghel showed that in quarter three of 2012 the Romanian economy performed much better than other European states. Compared with the same period of 2011, Romania registered an adjusted 1.7 percent growth, while the euro area declined 0.4 percent, the gap accounting for approximately two percentage points.

Regarding the economic growth forecast revision for 2012 and 2013, BCR pointed out that this was determined by the modest economic recovery until now and by the adverse conditions on the foreign and domestic markets.

'2012 will bring Romania the most severe drought over the past five years, with immediate negative effects on the economic growth and inflation. Besides these, the foreign environment remains a hostile one and the confidence of economic agents and consumers of the euro area does not reveal any recovery signs,' Eugen Sinca, BCR Research, Macro and Fixed Income Securities Research Team Analyst, said at the report presentation 'Romania: first gear.'

'Approximately 50 percent of Romania's exports have the euro area as destination and over 80 percent of the direct foreign investments in Romania come from these countries. Taking into account all these, we estimate a 0.7 percent economic growth in 2012 and 1.9 percent in 2013, decreasing from the previous forecasts. The under expectations performance in the filed of structural European funds drawing must be improved rapidly, if not, Romania risking a long period of under potential economic growth,' Eugen Sinca added.

 

Inflation at the end of 2012 should be 4 pct, no higher than 4.2 pct

 

Banca Comerciala Romana (BCR) is expecting year-over-year inflation in Romania to reach 4 percent at the end of 2012, but no higher than 4.2 percent, according to a BCR research report called 'First-speed Romania,' released on Thursday by BCR senior analyst Eugen Sinca.

BCR's inflation estimates were upwardly adjusted for 2012 from an initial 3.7 percent. BCR took into account a weak agricultural production, agri-food products with a weight of 37 percent in the inflation basket and the developments in the exchange rates.

The 4-percent inflation for 2012 is the higher level of the National Bank of Romania's targeted inflation of 3 percent, plus/minus one percentage point. BCR is expecting end-year inflation to be 3.5 percent in 2013.

'We are expecting the inflation rate to be at 4 percent at the end of 2012, which is the higher level of the BNR target. The rises in prices for agri-food products both domestically and externally as well as rises in administered prices are the main inflation-triggering factors in the period immediately ahead. At the same time, we are not ruling out the inflation target being temporarily overshot this autumn or early next year. Consequently, we believe that BNR is more determined now to favour a stronger local currency to contain inflationary pressure,' said Sinca.

He added that inflation accelerated this June, and then it jumped one percentage point in July, to 3 percent, as the favourabls basic effects vanished.

'In fact, the average monthly inflation rates in the first five months were not quite low, at 0.3 percent. A deficit in the aggregate demand will still be persistent for some time but it will not be able to counter the chronically short supply of goods and services in the domestic production. Food products are a good example to the point, as they make up the largest share in the consumption basket, at 37 percent. Besides food, which entered positive territory in annual terms this July, there were also elements that put pressure on inflation. Fuels, tobacco, electricity, heat, phone call prices, water supply and sewage fees are just some groups that fuelled the advancement of prices, just to name those that have high weights in the consumption basket. Demand for some of these products is less elastic, while other fall into the category of products at administered prices, for instance energy,' reads the report.

 

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