Energy prices bring Romania’s inflation to 5% in July

Energy prices bring Romania’s inflation to 5% in July
By bne IntelliNews August 12, 2021

Consumer price inflation in Romania reached 4.95% in July, rising sharply from 3.8-3.9% in May-June, the statistics office (INS) announced.

Energy prices are behind the spike. The electricity price soared by nearly one quarter compared to July 2020 after leaping up another 4.2% in July compared to June. The natural gas price increased by 20% in July compared to June 2021 after it had remained roughly steady over the previous 12 months. The heating price decreased slightly in July compared to June, but they will be revised as the cold season approaches.

Central bank governor Mugur Isarescu pledged to “prevent energy prices from passing through into the regulated prices of utilities” but it remains unclear how this can be done.

Inflationary expectations can in principle be toned down, though, by more restrictive fiscal and monetary policies. The government has not yet published the budget revision that in principle should envisage a smaller deficit since the economy has recovered faster than expected.

Based on the harmonised consumer basket used in the European Union, the inflation rate in Romania is still only 3.8% in July, up from 3.5% in June.

Based on some individual consumption baskets of lower-income households, the inflation might be even higher than the headline figure.

Returning to the national official consumer basket, food prices increased on average by only 2.3% in July, compared to the same month of 2020. Non-food prices were dragged up (+7.6% y/y) by the energy prices that have further increased in July.