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Real GDP fell further in Q4 2009 and inflation increased in January 2010

The flash estimate of the statistical office showed that economic activity contracted further in last quarter of 2009. In Q4 2009, the real GDP fell by 1.5% from Q3 2009 and by 6.6% from Q4 2008.

Both figures were below our and market expectations (+0.1% qoq and -5.5% yoy). Real GDP fell by 7.2% in 2009.

Dynamics of GDP components would be detailed on 3rd March. Based on available data, we think that net exports (on the uses side) and the industry (on the supply side) remained the main drivers of the GDP. On the other hand, domestic demand (consumption and investments) remained weak given that both retail sales and value of imports fell in Q4 (-3.7% qoq and -2.8% qoq respectively).

Consumers' and investors' weak confidence sentiment points to weak consumption and investments in the period ahead, while industry and exports would continue to expand based on improving external demand. We see the real GDP expanding only by around 1% this year.

Monthly inflation rate in January came in at 1.7% mom, substantially above market expectations (1.1% mom). The annual rate of inflation increased from 4.7% yoy in December to 5.2% yoy in January. The main drivers of inflation rate were the increase in tobacco prices (+13.9% mom) and in fuel prices due to hike in excises, and the increase in tariffs for electric energy (+4.2% mom). Otherwise, underlying inflationary pressures remained contained, as CORE3 measure of inflation (headline inflation without regulated prices, volatile prices, and prices of major items subject to excise duties) continued to decrease (from 2.8% yoy in Dec 2009 to 1.9% yoy in Jan 2010).

Given that real GDP remains substantially below its potential level and the inflation rate is expected to fell rapidly starting February, we expect the central bank to cut further the key interest rate at the next monetary policy meetings. High rates of inflation in recent months were fuelled mainly by the increase in excises which should have a one-off effect and should not raise inflationary concerns for the central bank. We see the key interest rate at 6.25% at the end of this year, down from 7% currently.

Sursa: http://www.raiffeisen.ro

Tags: inflation prices january further

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