‘Smaller’ inflation in the following months

Ionuţ Dumitru, the president of the Tax Council, predicts that beginning with July 2011 the effect of the 2010 VAT increase will not affect the consumer prices.

The main priority for the National Bank for this year is to keep the price rises under control.
The possibility to reach this goal will be more clearly predicted in the second half of this year, when the 2010 VAT increase will have had its consequences.

The analysts estimate that 2011 will be a favourable year for the evolution of the inflation and the indicator which is calculated every year will reach the value of 4 percent after July, when the effect of the 2010 VAT increase will no longer affect the consumer prices.

Ionuţ Dumitru, the president of the Tax Council, the chief economist of an important bank in Romania claims that in the next months Romania can ‘anticipate quite a smaller inflation than in the previous months’.

In Ionuţ Dumitru’s opinion, in the next period ‘we will face a inflationary pressure as a result of the excise duty adjustment on the 1st of January’, but comparing with last year, when Romania reported ‘a very high inflation decrease in January 2010, January 2011 will probably report a substantially smaller monthly inflation’.

Ionuţ Dumitru has also anticipated that ‘Romania will have an annual inflation around 7 percent in the first quarter of 2011’.

The president of the Tax Council adds that since the consequences of the VAT increase will no longer affect the annual inflation starting with the 1st of July, ‘the annual inflation will substantially decrease around 4 percent, probably by the end of 2011’.

Regarding the economic rise, Ionuţ Dumitru also considers that in the first quarter of the year we could talk about an economic revival as a result of the export increases, in the conditions in which the deficit of the domestic request will still exist.

Ionuţ Dumitru has declared that ‘on a short term the economy will continue to be affected by the adjustment programme in the budgetary sector, in the context in which the real incomes of the population not only from the budgetary sector but to the entire field of economy are expected to adjust in the following months, which is to be considered a negative factor from the consumer perspective. So, practically, the consumer in economy cannot reach a very good value on a short term’.

The consumer increase will gradually revive

Ionuţ Dumitru has also mentioned that the consumer revival will be ‘a slow and gradual’ one.

‘Practically, the economy in the first quarter of the year will depend on the Western economy, therefore on the external request, our exports, in the context in which, as I was saying, the vast part of the gross domestic product, which is the domestic request, the consumer, will not work that well’, Ionuţ Dumitru has also added.

Regarding the evolution of the currency exchange of the Leu, Ionuţ Dumitru believes that it will be relatively stabilized all the year in 2011.

Ionuţ Dumitru has anticipated a stable currency, ‘oscillating plus or minus 1-2 percent comparing to the level from the present moment, which is between 4.2 and 4.35, maximum 4.4 percent’.

Ionuţ Dumitru predicts that in the first quarter the evolution of the currency exchange will depend not only on the internal factors, but on the situation in the western economies, as well on the international markets stability and the crisis of the highest debts in the Euro-zone.

Translated by: Violeta-Mădălina Florea and Andreea Velicu
MA students, MTTLC, Bucharest University