Inflation inches down in Romania as government caps energy prices

Inflation inches down in Romania as government caps energy prices
By bne IntelliNews December 14, 2021

Consumer prices in Romania remained steady in November compared to October and the inflation rate even edged down to 7.8% y/y from 7.9% y/y in October, the statistics office INS announced.

After the government enforced the ‘cap and subsidy’ mechanism for residential energy prices (electricity and natural gas), the price of electricity dropped by 12.2% m/m in November and this offset the moderate increase in the prices of fuels (+1.7% m/m), natural gas (+2.3% m/m), heating (+10% m/m) and of some food products (edible oil, sugar).

Notably, the natural gas price kept increasing in November (+2.3% m/m) despite the same subsidy mechanism being enforced as for electricity.

In annual terms, the main inflationary drivers are the price of fuels (+25% y/y) and energy (electricity, gas, heating +23% y/y).

The prices of some food items increased significantly as well: that of the edible oil rose by 28% y/y, while those of the sugar and maize were up by 10%-12% y/y.

Looking forward, the higher energy prices are expected to pass through to consumer goods prices resulting in persistent inflationary impetus. Romania’s industrial price inflation soared to 26.8% y/o in October, largely due to the high energy cost, putting pressure on the consumer price inflation that neared 8% y/y in the same month. The Romanian central bank expects inflation to peak at 8.6% next year.

The headline inflation is expected to hit 7.5% y/y at the end of this year then rise to 8.6% y/y at the end of the second quarter of next year as the temporary energy bill subsidies are phased out, and ease to 5.9% y/y at the end of 2022, under the revised inflation outlook revealed by the National Bank of Romania (BNR) on November 11.

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