Bucharest – The National Bank of Romania (BNR) will keep a monetary policy interest rate of 9.5 per cent, and the rate of inflation could fall to under 8.5 per cent in April, according to a report drafted by analysts with the Romania Commercial Bank (BCR) made public on Monday. However, the central bank may toughen its monetary policy by making foreign loans requirements more difficult according to the report. BNR is to take yet another decision at today’s meeting over the monetary policy interest rate. The foreign direct investments (FDI) may reach EUR 7.8 bln this year, thanks to more industrial investments and finished privatizations, according to the same report, which shows that foreign companies see Romania as having a significant business potential. BCR experts say this potential is outlined by a 40 per cent growth of dividend flows between 2005 and 2007. During 2002-2004, dividends totalled EUR 1.9 bln, and jumped to EUR 10.3 bln during 2005-2007.
The volume of exports has risen too on the back of a higher industrial production in February, and the indirect tax revenues collected into the general consolidated budget went up 80.3 per cent in the first quarter, which could substantially boost economic growth.
The annual rate of inflation could drop to under 8.5 per cent, due to the April appreciation of the RON and a positive trend of administered prices. Exchange rate fluctuations had been significant during April, according to the BCR report, caused by a locally-induced major appreciation before Easter – sales by economic operators of hard currency aimed at paying state taxes and remittances from Romanian workers abroad - but also a strong correction caused by international factors, among others, late that month. BCR may keep the monetary policy interest steady at 9.5 per cent, BCR analysts say, who does not rule out a more restrictive monetary policy through certain measures aimed at discouraging the borrowing of foreign loans.
On the other hand, analysts with the Unicredit Group believe that Romania will witness a slowdown in economic growth to 4.7 per cent in 2010, and kept their previous predictions over a rise in the Gross Domestic Product (GDP) to 5.5 per cent and 5 per cent in 2008 and 2009 respectively.
A Unicredit analysis for several Central and Eastern European states and the euro zone anticipates Romania’s GDP will surge 6.5 per cent this year, 6.1 per cent in 2009 and 5.8 per cent in 2010.
On the average inflation for the interval 20078-2010, experts prognosticate inflation to go down to 3.8 per cent in 2010, from this year’s forecast of 7.4 per cent.
Unicredit analysts are of the view that the current account deficit will grow to 14.2 per cent GDP this year, from 13.9 per cent GDP in 2007. Years 2009 and 2010 may see the deficit going down to 13.5 per cent GDP and 12.8 per cent GDP. The foreign direct investments (FDI) will follow a descending trend to 3.55, compared to 4.5 per cent this year.
Unicredit analysts say that BNR might increase the monetary policy interest rate by another 0.5 per cent, to 10 per cent. Also, economists forecast that the central bank would cut the interest rate by 1 per cent next year, and to 7.75 per cent in 2010. The crediting rate will go down from 35 per cent this year to 17 per cent in 2010. Deposits will see a similar trend, down, from 26 per cent this year to 14.5 per cent in 2010.