Romania’s inflation eases to 1.9% y/y in September after cut in VAT on bread

By bne IntelliNews October 10, 2013

Romania’s consumer price inflation eased to 1.88% y/y in September from 3.67% y/y in August, the statistics office reported. Consumer prices dropped for a third consecutive month, by 0.6% m/m in September. While the enforcement of preferential VAT rate for food had a visible impact, the weak demand, strong local currency and the certain decline in global commodity prices are the other significant drivers of disinflation.

The cut of VAT rate on bread from 24% to 9% had a significant contribution to disinflation. Filtering out the impact of lower bread price*, the annual inflation would have been 2.52% y/y in September [down from 3.67% y/y in August], according to our calculations. The consumer prices would have edged up by some 0.1% m/m in September.

Food price deflation driven by record crops in Romania and abroad plus the VAT rate cut for bakery contributed significantly to the recent disinflation – but the CORE 2 inflation and the adjusted CORE2 inflation are also at their lowest level in the two post-communist decades.

CORE2 inflation was 2.9% y/y in August – latest available data. Adjusted CORE2, calculated by the central bank to filter out even more of the volatile prices from CPI basket, was 2.2% y/y. Adjusted CORE2 eased by 1pps since the end of last year.

A key driver for the current deflation is the subdued demand. Private consumption stagnated in H1 – but the retail sales gradually lost ground to minus 0.1% y/y in Q1 and minus 1.8% y/y in Q2. Another important driver for disinflation in Jul-Sep was the exchange rate’s dynamics. The local currency has strengthened versus the euro nominally - by 2.8% y/y in July, 1.8% y/y in August and 0.9% y/y in September.

Finally, the inflationary pressures from industry [production side] eased substantially as the industrial price inflation slowed down to o.6% y/y in August. The industrial prices for industrial goods traded [imported/exported] on foreign markets decreased on the year in each of the past five months [April-August].

* which was also a result of lower wheat price this year and expected low grain prices for the coming months

Related Articles

Almaty cost of living lowest among major cities

Kazakhstan’s largest city and business centre Almaty has dropped to last place on the Economist Intelligence Unit’s bi-annual ranking of the ... more

Bucharest urges local government to borrow from banks despite warnings from IMF and EC

Romania’s local administration can co-finance the EU-funded projects from bank loans at interest rates lower than the financing cost of the Treasury, Romania’s central government reportedly ... more

IPO of Romanian telco RCS&RDS reportedly planned for May

A group of shareholders of Romanian diversified telecoms group RCS&RDS want to sell 20%-30% of the group’s shares in an IPO, Ziarul Financiar daily reported. The IPO is expected to take place ... more

Register here to continue reading this article and 2 more for free or purchase 12 months full website access including the bne Magazine for just $119/year.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

To continue viewing our content you need to complete the registration process.

Please look for an email that was sent to with the subject line "Confirmation bne IntelliNews access". This email will have instructions on how to complete registration process. Please check in your "Junk" folder in case this communication was misdirected in your email system.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

If you have any questions please contact us at sales@intellinews.com

Subscribe to bne IntelliNews website and magazine

Subscribe to bne IntelliNews website and monthly magazine, the leading source of business, economic and financial news and commentary in emerging markets.

Your subscription includes:
  • Full access to the bne content daily news and features on the website
  • Newsletters direct to your mailbox
  • Print and digital subscription to the monthly bne magazine
  • Digital subscription to the weekly bne newspaper

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

bne IntelliNews
$119 per year

All prices are in US dollars net of applicable taxes.

If you have any questions please contact us at sales@intellinews.com

Register for free to read bne IntelliNews Magazine. You'll receive a free digital subscription.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

IntelliNews Pro offers daily news updates delivered to your inbox and in-depth data reports.
Get the emerging markets newswire that financial professionals trust.

"No day starts for my team without IntelliNews Pro" — UBS

Thank-you for requesting an IntelliNews Pro trial. Our team will be in contact with you shortly.

Dismiss