ECONOMY

In Brief

Romania 2010 inflation seen as high as 8.5 pct BUCHAREST (Reuters) – Romania’s inflation could reach as much as 8.5 percent this year after a hike in value-added tax, but the central bank will not change its price growth target, an adviser to the central bank governor said. «Following the [austerity] measures, inflation will go to 8-8.5 percent,» Lucian Croitoru, an adviser to central bank Governor Mugur Isarescu, told local television station The Money Channel late on Thursday. «The target… must be maintained because people must understand the central bank is faithful to price stability. Despite my year-end forecast, we need to keep the target, because after rising, [inflation] will start to fall in 2011.» Inflation was running at 4.4 percent year-on-year in May. The government decided to hike VAT by five percentage points from July 1 to 24 percent, one of Europe’s highest rates, after a top court rejected planned pension cuts. The VAT hike, coupled with cuts in state wages, should ensure the board of the International Monetary Fund, which meets yesterday, will approve aid disbursement from Romania’s 20-billion-euro aid package. Romania’s central bank targets inflation at 2.5-4.5 percent this year and 2-4 percent in 2011. Croitoru said he estimated inflation will meet next year’s target. He also said he expected the economy to contract 2 percent this year. Separately yesterday the country’s National Statistics Board announced that Romanian industrial producer prices rose 6.5 percent on the year in May and were up 1.3 percent from the previous month. Serb central bank holds interest rates steady BELGRADE (Reuters) – Serbia’s central bank left its main interest rate at 8 percent yesterday as it seeks to balance concerns over faltering growth and a weakening currency that it has been forced to step in to support. The bank has cut rates by 1.5 percentage points this year – with the last cut in May – as part of a broader cycle that has seen it lop almost 10 percentage points off official borrowing costs since January last year. In a Reuters poll on Thursday, eight out of 10 analysts and currency dealers surveyed had said they expected the bank to keep its two-week benchmark rate unchanged, mainly due to lower inflationary expectations. One analyst saw a rate rise to 8.25 percent, while another saw a rate cut to 7.5 percent. The decision followed further weakening of the dinar this month. The currency has fallen 8 percent against the euro this year and hit a record low of 104.81 to the euro on Wednesday. «This is an indication that the central bank believes that the exchange rate is satisfactory and that they will likely keep a watchful eye on the consumer price index for their future policy decisions,» a senior dealer said. Analysts forecast year-on-year inflation will fall to 4.35 percent in July from a forecast 5 percent in June. Retail price inflation in June fell to 6.4 percent year-on-year, from 6.8 percent in May. Since January, the bank has sold about 1.4 billion euros to bolster the dinar, which has fallen from around 76 against the euro when the financial crisis erupted in September 2008. EBRD-Turkey The European Bank for Reconstruction and Development (EBRD) is lending $180 million to Turkish lenders Garanti, Akbank and state-run Vakifbank, an EBRD director said yesterday. The three banks will each get $60 million. The EBRD will also lend $20 million to Denizbank, a unit of Belgian-French group Dexia, Michael Davey, country director for Turkey, said at a press conference. The EBRD said on Monday that $200 million in funds would be earmarked for promoting energy efficiency in Turkey. (Reuters) Turk lenders Turkey’s banking sector profits rose 13.9 percent year-on-year to 10.328 billion lira ($6.56 billion) in the first five months 2010, Turkey’s banking sector watchdog said yesterday. It also said in unofficial data the sector’s total assets rose 18 percent in the same period, while the sector’s loans were at 439.3 billion lira. (Reuters)