Economic Overview - October 2009

13 Noiembrie 2009

RAIFFEISEN BANK S.A.

 

Highlights

Annual inflation rate decreased form 5% yoy at the end of August to 4.3% yoy at the end of October. Headline inflation rates were high both in September and October (at around 0.4% mom), being fuelled by the increases in tobacco prices and leu depreciation. However, CORE 3 measure of inflation decreased both in September and October, showing that underlying inflationary pressures remained contained.

NBR remained on hold on 3 November, keeping the monetary policy rate unchanged at 8%. The central bank is aware of the persistent deceleration of economic activity, but it is probably more concerned about the risks and uncertainty raised by the political turmoil.

Money market interest rates increased in last month, as liquidity conditions in the money market tightened. ROBOR 1M climbed above 10.5%, substantially above the level of the monetary policy rate.

Industrial output expanded also for the second quarter in a row. It increased by 1.8% qoq in Q3 2009. Retail sales stabilized also in Q3 (+0.1% qoq) after falling in the previous quarters. Output in construction sector decrease further in the third quarter (-7.5% qoq), but at a slower pace as compared with the second quarter. Available data suggest that real GDP has most likely decreased again in the third quarter.

IMF mission, together with teams from the European Commission and the World Bank, was in Bucharest between 28 October and 6 November. The IMF representative said that Romania fulfilled nearly all targets set for the end of the third quarter. However, "crucial components" of the program cannot be implemented in the context of current political instability. A new mission will come again in Bucharest after a new government will be established.

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