Romania’s headline inflation further eases to 1.55% y/y in December 2013.

By bne IntelliNews January 13, 2014

Romania’s consumer price inflation eased to a record low of 1.55% y/y in December 2013 from 1.83% y/y in November, the country’s statistics office said. In monthly terms, prices edged up by 0.33% in December driven by a seasonal 0.62% y/y rise in food prices.

The average inflation in 2013, however, accelerated to 4% y/y from 3.3% in 2012. More precisely, the annual rise in the trailing 12-month consumer price index quickened from 2.8% in July-Aug 2012, amid weak 2012 output of farms, to 5.1% y/y in July-Aug 2013. Both good crop in 2013 and particularly the VAT cut for bakery goods pushed down the 12-month trailing inflation to 4% y/y in December. The pattern is likely to continue in the first quarter of 2014 on the same drivers that were active in Q4 2013. While the administrated prices (gas, electricity) were hiked only modestly in January, the impact of inherent natural gas price adjustments is expected only later in the year.

The main risk to price stability is posed currently by the exchange rate after the central bank expressed more acceptance to moderate depreciation. The central bank not only cut the monetary policy rate by 25bps in January to 3.75% but also reduced the required reserve ratios for both local and foreign currency liabilities. This already exerted pressures on the exchange rate, even if the 1-2% weakening seen so far is not particularly relevant.

As of December, food prices were 1.81% down y/y shrinking on an annual basis for the sixth month in a row. In full-2013, food prices were 3% up y/y, below the 4% y/y average inflation – reversing the above-average rise of 6% y/y in 2012, when total inflation was 5.8% y/y. Non-food prices increased by 3.6% y/y in December and by 5.2% y/y on average in 2013. The annual growth in prices of services was below the average, helped by the stable exchange rate (used by many services providers to link their fares to). Average services prices increased by 3.4% y/y in December and 3.2% y/y in full-2013.


Related Articles

Banca Transilvania continues expansion as it prepares to snap up Eurobank's Romanian units

Greece’s Eurobank said on November 10 that it expects to sell its Romanian units to local lender Banca Transilvania (BT) at the end of November. The transaction includes Bancpost, ERB Retail ... more

EU calls for tax haven blacklist in Paradise Papers fallout

The finance ministers of the European Union member states have called for the creation of a blacklist of tax havens to crack down on tax dodging, the ministers said at a meeting in Brussels on ... more

Romanian trade union confederation prepares to launch general strike

Romanian trade union confederation CNSLR Fratia announced on November 2 it has decided to start procedures to launch general strike, following the government’s decision to transfer social ... more