The macroeconomic confidence index issued by the CFA Society Romania increased by 5pts m/m to 46 in January, offsetting the 3pts fall recorded in December, according to the latest release of the institution. We remind that the indicator hit the lowest value since April 2013 at the end of 2017, most probably dragged down by the domestic uncertainties on the political, fiscal and legislative fronts and falling trust in the government. The rise in January was triggered by a strong increase of the expectations index, which was up by 8.4pts to 20.4 in the month. At the same time, the current conditions index decreased again, by 1.8pts to 57.2, as the CFA analysts do not see the fiscal and political situation settled by now.
Over 90% of the respondents in the survey see a stronger depreciation of the local currency in the following months, a smaller share than the 92% in December. That is most probably because a few of the analysts think that the central bank’s policy rate hike would have stronger and faster effects on sustaining the local currency. However, the increasing pressures for CA gap widening pushed up the EUR/RON rate average forecast to 4.7168 in the following 6-month period, from 4.6998 estimated in the previous survey. Meanwhile, for the 12-month period the EUR/RON fx rate is seen at 4.7643, also above the 4.7428 estimated in December. The CFA analysts assessed that the 12-month average inflation rate would speed up to 3.71%, which is below the 3.75% estimated in December, again most likely because of the monetary tightening. Still, January was the sixth consecutive month when the CFA analysts see the inflation rate in the upper area of the central bank’s target interval in the 12-month horizon, which indicates that the inflation expectations remain elevated, with very likely speeding effects on the current headline inflation. Obviously, almost all the CFA analysts kept their anticipations on rates growth on short- and medium-term maturities in local currency and on the governmental bond yields, to well-above the policy rate, but slightly below the levels estimated in December.
The index is compiled from a survey among analysts and measures the confidence in Romania’s economic activity in the following year. It has two major components, the current conditions and future expectations regarding the business environment and labor market.