Liviu Voinea: Inflation Is No Longer The Economy"s Main Problem

Andreea Arăboaei

Inflation is no longer a problem for Romania"s economy for the time being as it is more important to reduce public and private consumption and thus set the inflation rate on a downward trend, according to Liviu Voinea, President of the Applied Economics Group (GEA). The stability of the national currency is also contributing to inflation control, as the RON has gained over 4% to 4.11 RON/EUR since the agreement with the International Monetary Fund (IMF) was signed three weeks ago.

The annualized inflation rate decreased to 6.71% in March from 6.89% in the previous month, with non-edible products taking the lead (0.68%), followed by edible products (0.39%) and services (0.33%), according to the National Statistics Institute (INS). Among edible products, citruses gained 8.28%, followed by sugar (1.71%) and potatoes (1%). Meat by-products gained 0.63%, bread 0.13% and dairy 0.19%. On the other hand, the price of eggs decreased by 5.11%, while edible oil lost 3.18%. Fresh fruit became 0.87% less expensive, while the price of flour lost an insignificant 0.02%.

In the non-edible category, tobacco drove the price hike, followed by books, newspapers and magazines (1.52%), fuel (0.70%) and medicines (0.19%). Urban public transportation became 0.9% more expensive, while rent gained a minor 0.11%. Tap water, sewerage and garbage disposal became nearly 1% more expensive. On the other hand, airway transportation and telephony services became more affordable by 0.04% and, respectively 0.05%. The price of automobiles and spare parts lost 0.29% from February.

As of this year, the ratios in the consumption basked based on which the INS calculates inflation are: edible products - 37.58%, non-edible products - 44.05% and services - 18.37%. Among others, the International Monetary Fund"s has recommended to keep the inflation rate within the target set by the National Bank for Romania for end-2009 and then at a sustainable level in the following years. The National Bank"s inflation target for this year is 3.5% +/- one percentage point. Their latest forecast is 4.6% at the end of the year.