Bucharest, October 5, 2023 – by rbj – In the press release sent after the meeting of the Administrative Council, the National Bank of Romania shows that the annual inflation rate continued to decline in the first two months of 2023 Q3 overall, in line with forecasts, going down from 10.25 percent in June to 9.43 percent in August, amid the deceleration in the growth rate of food prices and the further drop in energy price dynamics, only partially counterbalanced, in terms of impact, by the hike in fuel and medicine prices.
At the same time, the annual adjusted CORE2 inflation rate saw a faster decrease in the first two months of Q3, falling slightly below the forecast to reach 12.0 percent in August, from 13.5 percent in June. The developments are mainly ascribable to disinflationary base effects, declining prices of commodities, primarily agri-food items, and to the measure to cap the mark-ups on basic food products. However, they also reflect a mitigation of the opposite influences coming from the gradual pass-through of higher corporate costs, especially wage costs, into consumer prices, given the resilience of demand in certain segments, as well as from the movements in import prices.
The annual inflation rate calculated based on the Harmonised Index of Consumer Prices (HICP – inflation indicator for EU Member States) stood at 9.3 percent in August, a level similar to that in June 2023. Furthermore, the average annual CPI inflation rate and the average HICP inflation rate fell to 13.2 percent and 11.8 percent respectively in August from 14.2 percent and 12.5 percent respectively in June, remaining below the levels prevailing in the region and the Baltic countries.
Economic growth sped up in 2023 Q2, to 0.9 percent from 0.5 percent in the previous three months (quarterly change), above forecasts, which makes it likely for excess aggregate demand to stop its contractionary trend over this period.
In annual terms, however, GDP growth continued to decrease more than expected in Q2, to reach 1.1 percent, from 2.4 percent in the first three months of the year. The decline was driven this time round by household consumption, whereas gross fixed capital formation saw a slight re-acceleration in its double-digit annual growth, and net exports exerted a larger expansionary impact, given the widening of the positive differential between the dynamics of exports of goods and services, in terms of volume, and those of imports. Against this background, the trade deficit and current account deficit continued to narrow substantially in 2023 Q2 versus 2022 Q2.
The latest data and analyses point to a more subdued economic growth in Q3 than previously forecasted and lower than in Q2, implying however a relative recovery in the annual growth rate of GDP, under the influence of a base effect.