The decision to lower the VAT on foodstuffs, from 24 to 9 per cent (on 1 June 2015), continues to have significant impact on consumer prices. According to the National Statistics Institute (INS), consumer prices dropped by 2.1 per cent year-on-year and by 0.8 per cent month-on-month in January 2016. Food prices remained on a steep slump, dropping by 6.3 per cent year-on-year, but growing by 0.5 per cent month-on-month.
In January 2016, the share of merchandise and services that registered year-on-year price drops stood at 53.3 per cent, while those that registered year-on-year price hikes of 0-2.5 per cent stood at 28.9 per cent. The merchandise and services whose prices grew by over 2.5 per cent had a share of 17.8 per cent, an INS communiqué shows.
The average growth of consumer prices in the last 12 months (February 2015 – January 2016), compared to the previous 12 months (February 2014 – January 2015), stood at -0.8 per cent.
Compared to January 2015, foodstuff prices dropped by 6.3 per cent, however the prices of non-food merchandise grew by 0.1 per cent and the price of services by 1.2 per cent. Compared to December, the prices of foodstuffs grew by 0.5 per cent. On the other hand, compared to December the prices of non-food merchandise were lower by 1.5 per cent and of services by 1.1 per cent.
The biggest price hikes among foodstuffs were registered by potatoes (+3.9 per cent), vegetables and canned vegetables (+3.07 per cent), fresh fruit (+2.3 per cent), fruits and canned fruits (+1.9 per cent) and cooking oil (+1.3 per cent). On the other hand, the steepest price drops were registered by Tuica, brandy and other alcoholic beverages (-2 per cent) and wine (-1.8 per cent).
Among non-food merchandise, the steepest price drops were registered by natural gas (-3.23 per cent) and fuels (-3.07 per cent). When it comes to services, the tariffs for water, sewerage and sanitation dropped by 7 per cent.
In February, the Central Bank revised upward its prognosis on the annual inflation rate, by 0.3 percentage points, compared to the November 2015 estimate, to 1.4 per cent this year. The inflation rate is expected to reach 3.4 per cent in 2017.
The inflation rate stood at -0.9 per cent at the end of last year, in contrast to -1.1 per cent in November and the -1.87 per cent historic low registered in August. In the absence of the impact of the reduced VAT rate (since June), the inflation rate would have stood at approximately 2 per cent in December, within the National Bank of Romania’s (BNR) target interval.