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| Price Developments |
| (2011-09-13) |
| Last updated: 2011-09-14 11:47 EET |
According to a National Statistics Institute announcement, consumer prices in Romania fell for the third consecutive month in August as a result of cheaper foodstuffs. The annual rate of inflation dropped to 4.25%, bringing it to within about one percent of the target rate of 3% set by the National Bank of Romania.
Advisor to the Governor of the National Bank, Adrian Vasilescu, explained: "You might argue that Romania has entered a period of deflation, but that is not the case. The annual rate has registered a significant fall, but it is still at 4.25%. The difficult areas in the foodstuffs sector that have given us problems for months now are steady, at a negative. The only significant growth recorded in August is in the egg sector. For non-foodstuffs, we face serious price slumps for drugs, fuels, tobacco and cigarettes. All these decreases make a big impact on consumption levels. At the same time, we do have two areas recording substantial increases: at the National Rail Company, and the price of water, sewers and public sanitation. This area of growth is hard to understand."
Even though, over the last three months, consumer prices have fallen as compared to December 2010, they have nevertheless been higher by nearly 2% than before. The fall in prices, particularly in the food sector, can, according to economic analyst Sorin Paslaru, be explained as a result of the simultaneous fall in demand and the increase in supply. He also points out the possible changes that will come about with the elimination of heating subsidies.
According to Sorin Paslaru, even though the prices might continue to fall in Romania, the national economy is not expecting spectacular growth: "Question marks are beginning to appear over Romania's economic development next year. Uncertainties are on the rise. An important aspect to note is that after three years of crisis in Romania, a model for economic growth has still not been found to help up us move away from dependence on other countries. We might see economic growth, but it will be well below the 4% estimated by the Romanian Government."
Recently, the Chief Economist of the Central Bank, Valentin Lazea, said that Romania had a historic opportunity to bring inflation down below the 3% mark in the next few years. According to him, this will be possible if the National Bank's monetary policy receives 'firm' support from fiscal and wage policies. Lazea explained that a large portion of inflation was due to structural issues that take a long time to resolve.
Valentin Lazea: “ The main challenge is respecting macroeconomic balance, even during an electoral year, so that the figures established in the fiscal-budget strategy can be achieved. In any case, it is clear that if something bad happens in Europe or in the US, this will affect us too, but we hope that it won't come to that."
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