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BNR vice-governor Popa: Price increase might contribute 0.7 - 0.75 pct to inflation rate by mid-2011

The rise in industrial production prices will contribute between 0.7 and 0.75 percentage points to the mid-2011 inflation rate, vice-governor of the National Bank of Romania (BNR) Cristian Popa said on Friday.

'When we made the inflation projection for this time horizon of eight quarters, or 24 months, we considered a moderate increase in foodstuff prices deriving from three elements: the impact of VAT, differentiated by various kinds of foods; the possible negative impact of adverse weather conditions on the farming production; the international influence of the grain production. Here we have relatively moderate price increases, but the advance in industrial production prices is higher than the annual rate of inflation, which translates into the peak registered so far in June 2011, of a contribution of about 0.7 to 0.75 percentage points to the inflation rate,' said Popa.

According to the BNR official, the estimation is made based on an objective assessment. 'It is a significant [assessment], yet we do not need to get alarmed, under the reserve that at this moment we cannot fully anticipate the effect of the recent flooding on food prices,' Cristian Popa remarked. Asked if a possible resumption in consumption could result in a flare-up of inflation, the central bank official said that this is out of question, Agerpres reports.

'This is not about an inflation flare-up. We talk about a reduction in relative terms of the contribution of net exports to the GDP and the increase in 2011 - and particularly beginning with the in the second half of 2012 - of domestic demand, which would take the GDP to positive values. We do not anticipate an increase in consumption as asymmetric as in 2008. We count on a bounce-back of domestic demand in the second half of 2011. For 2011 overall, we see the GDP return to the positive territory beginning with the middle of the year,' said Popa.

'It will be a mixture between domestic demand and exports and the local demand will be supported by investments as well, not only by consumption (as before the crisis started in 2008 - e.n.),' Popa said.'I believe this is what we call a healthy growth,' he added. Hit hard by the recession, Romania's economy declined by 7.1% in 2009, after a growth of over 7% in the previous year. For 2010, the authorities estimate a contraction around 2%.

Sursa: http://www.actmedia.eu

Tags: inflation increase bnr

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