In June, inflation came to 2.8 percent, especially due to the increase in prices of food products, while the drought could take prices further up and stifle the breath of oxygen the Government counted on to curb prices this summer, so that inflation should be kept within an interval as close to 27 percent as possible.
Prices for food products increased by 3.7 percent, the price of flour and bread climbed about 7 percent, while non-food products got 3 percent more expensive. Among the latter products, electric power prices went 10 percent up, while tariffs for services remained almost flat, the National Statistics Commission announced yesterday.
The price drop during summer months has been used so far to curb annual inflation, based on the abundance of vegetables and fruit and on the increase of consumption from own resources, especially in peasants' households, estimated at 17-20 percent of the total consumption of food products.
"Consumption from own resources has saved inflation during the latest years, but this year, because of the drought, I am afraid the situation will be different. Summer months are crucial in reaching an annual inflation level standing below 30 percent," Lucian Liviu Albu, director of the Prognosis Institute within the Romanian Academy, told Ziarul Financiar.
Over the past years, the level of "summer inflation" was low. In august 1999, inflation reached a record low, namely 0.8 percent, but autumn months brought price increases for almost all categories of products.
The Government hopes to attain an inflation level below two percent for the following months, the Executive spokesperson Gabriela Vranceanu-Firea stated yesterday.
"This inflation rate is too high for a summer month. We were expecting a lower level," said Radu Gratian Ghetea, Alpha Bank Romania prime vice president and Romanian Association of Banks president. In his opinion, inflation will influence the current descending trend of bank interest rates, but this will occur at the end of the year.
However, National Bank of Romania officials say that, although they did not expect an inflation rate exceeding 2% in June, macroeconomic parameters are under control.
"Inflation is higher than we expected. This could be explained by the fact that energy was included in inflation calculations this month. The estimated level was exceeded by only one percentage point, which means that we might have an inflation rate of 28-28.5% until the end of the year," says Teodor Buftea, head of the monetary policy department within the central bank.
"We have made no revision on the data so far, therefore we are proceeding with the present monetary policy, but, if the data compel us, we will switch to a tighter monetary policy," Buftea states, adding that, in his opinion, interest rates will keep going down.
"Signals from abroad are favourable now, but unfortunately there is always something to spoil our plans. This year the drought itself may spoil the Government's macroeconomic plans," Lucian Albu concluded.
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