The National Bank has observed milder negative effects of the health crisis on economic activities and more favorable developments in the economy at home in the last quarter of 2020.
According to the central bank’s monthly report, the GDP’s drop in Q3 of 2020 has significantly slowed down, while performances in the first three quarters are within the expectations of the October forecasts.
“Released data and GDP revisions show that in the first three quarters of 2020, on average, the economy registered a real drop of 5.9 percent, which is in line with the expectations of the October forecast (forecasted decline of 6.1 percent). Regarding economic activity in Q4 of 2020, currently available high-frequency data for October-November 2020, generally point to milder negative effects of the health crisis on economic activity, and compared to the previous quarter, developments in the economy at home are more favorable,” the National Bank says.
It adds that in a situation of targeted and less restrictive measures taken in response to the second COVID-19 wave, gradual adjustment of behaviors and habits to the new situation, and measures taken to support the economy, data show further slowdown in the annual drop of industry and turnover in total trade, as well as accelerating growth in construction, while the only unfavorable developments are observed in the turnover in hospitality.
In terms of inflation, performance in 2020 as a whole is in line with forecasts, which
for the time being points to balanced risks in relation to inflation developments in the coming period, according to the National Bank.
As regards changes in consumer prices, reads the press release, the 2.3 percent annual inflation rate in December 2020 is slightly higher than expected in the October forecast. However, according to the National Bank in terms of 2020 as a whole, the annual inflation rate of 1.2 percent is in line with the October forecast (forecasted inflation rate of 1.1 percent).
“Consumer prices dynamics in the domestic economy in 2020 largely stems from food prices, which are 2.6 percent higher, as well as the positive contribution of core inflation which stands at 0.9 percent. On the other hand, energy prices register
1.4 percent drop, due to a high drop in oil prices on the world stock exchange, despite the fact that
this effect was partly offset by a decision to increase excise duties on part of
derivatives from April and a decision to increase the domestic price of electricity
as of August,” says the press release.
In terms of food categories, the central bank adds a slight increase has been observed in the price of bread and cereals, meat, dairy products and fruit.
The National Bank says that core inflation is mainly due to changes of an administrative nature, related to the increase in excise duty on tobacco prices.
In addition, the central bank highlights the uncertainty of developments in world prices of primary products in the next period and their impact on domestic prices, especially given the second wave of the COVID-19 pandemic and the new strain of the virus.
Foreign exchange reserves, adds the press release, are still at an appropriate level and remain in the safe zone.
In terms of the monetary sector, annual growth of deposits and loans as of November is mainly in line with forecasts Q4 of 2020.
