May 26 (SeeNews) - CFA Romania, an association of investment professionals, said on Friday that the state of the country's economy is good now but it is expected to worsen in the next 12 months.
The CFA Society Romania Macroeconomic Confidence Index for April increased by 4 points compared to the previous month, reaching 60.8 points, CFA said in a monthly survey.
The increase was mainly due to a strong positive perception of the current economic situation, an indicator which rose by 8.3 points to 76 points.
However, when thinking about the future, 48% managers expect business conditions to worsen in Romania over the next 12 months. Some 40% of managers expect business conditions to remain the same over the next year, while only 12% expect an improvement.
Romania's economy is expected to grow by 4.2% in 2017 before expansion slows to 3.4% in 2018, according to the IMF's latest economic forecast issued in April. Romania's 2017 budget bill is built on projections of 5.2% economic growth and sets deficit equivalent to 2.99% of GDP, a target that many find too ambitious.
In 2016, Romania's economy expanded by 4.8% year-on-year compared to a revised growth rate of 3.9% in 2015.
CFA analysts said they were expecting, on average, inflation of 1.65% in the period April 2017- April 2018, up 0.15 percentage points compared to the rate projected in March.
Romania's annual consumer price inflation accelerated to 0.6% in April from 0.2% in March, hitting a 23-month high. In its latest inflation report issued in May, Romania's central bank, BNR, lowered its 2017 inflation forecast to 1.6% from previously projected 1.7%. BNR also lowered its end-2018 inflation forecast to 3.1% from a previous 3.4% projected in February.
The analysts expect an exchange rate of 4.5500 lei ($1.11/ 0.99 euro) per euro in the next six months, down 185 pips from the previous survey and 4.6 lei per euro in 2018, similar to the estimates made in March. Some 73% of the participants in the survey said they expect the leu to weaken during the next 12 months.
On May 18, Romanian leu fell the most against the euro since October 2012. On that day, BNR set its reference exchange rate at 4.5729 lei per euro, the lowest exchange rate for the Romanian currency since October 24, 2012, when it reached 4.5754 lei per euro.
Some 57% of CFA analysts said they expect global economic conditions to be normal over the next 12 months, while 19.2% expect an unfavourable situation and 23.1% are optimistic.
The CFA Society Romania Macroeconomic Confidence Index, first released by CFA Society Romania in May 2011, represents an indicator that aims at quantifying financial analysts' expectations about economic activity in Romania for a time horizon of one year.
The Index takes values between 0 (no confidence) and 100 (complete confidence in the Romanian economy) and is calculated based on six questions regarding current conditions of business and labor market; expectations about business, labour market, personal income and personal wealth.
(1 euro = 4.5496 lei)