ING expects Romania's Central Bank to reach target deficit this year

According to a financial report issued by ING, the annual inflation rate expected is 4.1%, against 4.9%, as previously forecast. This might mean that Romania’s Central Bank (BNR) has got real chances to reach the target deficit in 2010. An increase in VAT and fuel prices and the redraw of heating subventions might attract inflation, the report goes on.

The report confirms that the external inflows have been consistently reduced in April 2010 as well (external finance and money sent by Romanian workers overseas), which put presser on the national currency, the leu. According to ING, BNR could operate a 0.25% cut in key interest this month, keeping the level of interest unchanged for the rest of the year.

Good news: the unemployment rate dropped from 8.1% to 7.7%, even if the phenomenon finds its explanation in the season.

Constrictions are stuck to a modest level and will continue to remain so for the next years, ING estimates.

„The economic contraction could be -1.4% this year (the Finance Ministry sees a contraction of -0.5%) or even stronger”, the study authors conclude.