320% Public Rent Hike Drives Romanian Inflation Up in May

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320% Public Rent Hike Drives Romanian Inflation Up in May

Public housing rent increased by 320% in May, as a result of a government decision, whilst contributing to around two thirds of this month's inflationary rate, according to data published yesterday by the Romanian National Statistics Institute (INS), quoted by zf.ro.

INS data reveals that public housing rent accounts for only 0.15% of the national monthly average consumption basket, compared with the 0.32% contribution of private rent. Public rent increased from 0.2 to 0.84 RON/square metre, as a result of a periodical updating process carried out by the government.

All in all, rents increased by 93% in May, compared with April, providing for two thirds of the 0.
64% inflation rate registered in the fifth month of the year. The information regarding the doubling of rent is derived from the inflation rate, as calculated by the INS. Inflation stood at 0.64% in May, compared with April 2007, and at 3.81%, compared with May 2006, according to INS data.

The rent hike caused service prices to increase by 2.31%, significantly higher than the rise in food prices (0.23%) and in non-food (0.33%). Out of food products, agricultural produce (fruit and vegetables, both fresh and tinned) witnessed the highest price rises, while the increase in car fuel prices influenced price hikes on the non-food segment.

Annualised inflation rose slightly in May, to 3.81%, compared with 3.77% in April. The National Bank has set 4% (plus or minus a 1% margin) as its full-year inflation target.

Additionally, yesterday, the INS published Romania's foreign trade data for April, indicating that trade deficit decelerated, to a rate of 51%, compared with 72% in Q1. The deficit increase, in the first four months, fell to 66%, according to the data published yesterday by the National Statistics Institute. Overall, the trade deficit stood at 1.58 billion euros in April and at 5.68 billion euros for the first four months of the year.

Still, the progress of the trade deficit continued at a more rapid rate than last year (45%) and at a much faster rate than this year's estimated 31%, says the National Forecast Commission (CNP). The institution's chairman, Ion Ghizdeanu, says the good news is that the deficit has decelerated for the third month in a row.

"The bad news is that the deficit continues to grow beyond expectations," he specified. The trade deficit came close to 15 billion euros for the entire of 2006, and is expected to increase to almost 20 billion euros this year.

In April, Romanian exports witnessed their highest growth since the beginning of the year, more than 16% (taking the four-month growth rate at 14.8%).

Foreign sales of Romanian-made products amounted to almost 9.3 billion euros. At the same time, imports slowed down slightly in the fourth month of the year, to 24% (30% in the first four months). Romania's imports totalled nearly 15 billion euros in the first four months of 2007.

The trade deficit therefore remains the main growth driver for the current account deficit, which increased by more than 120% in the first quarter of the year.

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