Macroeconomic Forecast Optimistic Despite Oil Prices

February 2008 | Macroeconomic Forecasts

The government warned high oil prices could drive up inflation, worsen the current account and eat into the country's foreign reserves. While we do see the current account worsening in absolute terms, we project the current account deficit as percent of GDP will fall to 8.1% in 2008 from 9.4% in 2007 and to 6.7% by 2010. We also see the country's foreign reserves increasing while import cover simultaneously falls to 5.0 months in 2008 from 5.2 months in 2007. We are also optimistic on inflation, seeing the end 2008 inflation rate fall to 5.1%, although food and oil inflation do present upside risks.

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