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| Consumption and Price Hikes 01/03/2011 |
| (2011-03-01) |
| Last updated: 2011-03-02 13:07 EET |
The most recent EU statistical data indicate that in Romania prices have gone up by the highest margin in the last 12 months among European countries, and this country has had the highest rate of inflation. The largest oil companies in Romania on March 1st announced that prices for fuels of all kinds were going up, by 9 bani per liter. This price hike was written off to rising worldwide oil prices, which lately have skyrocketed.
Moreover, in Romania fuel prices are also influenced by the fiscal policy and the exchange rate of the leu. This, however, is not the worst news. In addition, oil companies do not rule out gasoline reaching prices of 7 lei per liter, compared to the present 5 lei or so. National Bank officials claim that that was pure speculation, saying that the Romanian market cannot sustain such a price hike, which would cause a chain reaction in terms of prices for food, services, and other staples.
The head of the Union Federation in the Food Industry, Dragos Frumosu, has also warned that quote: “Although consumption has dropped, uncontrolled imports and the chains of intermediaries will have food prices go up”unquote. The baking industry employers’ association has announced that, starting in March, the price for bread and related products might go up by 10 to 15% because of wheat imports, while companies in the dairy and meat industries have announced they increase prices by 4 to 8%, invoking higher raw material prices.
The same issue arises in animal husbandry. Romalimenta president Sorin Minea warns that the present situation in the food industry might trigger a black market explosion. “If inflation is not held in check and the value of the national currency goes down, it is natural for prices to go up. And if we also take into account the fact that under the present economic circumstances the purchasing power has dropped significantly, of course the black market might go rampant.
This is chaos, we can no longer speak of competition, this is black market, even in some stores”. What would the alternatives be? Decreasing production, bankruptcy, or selling on the black market, believes the Romalimenta president. Managers in the economy are not too optimistic either. They foresee prices between February and April going up by 10% in constructions, by 11% in services, by 16% in the processing industry, and by 38% in retail. Rail and public transportation fees will go up too, as a result of the rising price of fuel and of inflation.
Faced with the possibility of once again missing its inflation target, the National Bank of Romania has once again started to fight the rise in prices by indirectly intervening on the currency market to support the strengthening of the leu against the Euro, and thus ease the pressure on the price of imports.
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