The inflation rate surged to a surprising 1.3% in July, becoming the second month this year (after January) when price increases averaged more than one percent.
The price increase index is thus breaking the declining trend that was predominant in the first half of the year, going up to an annual rate of 12.1% in July, only two percentage points less than last year.
To reach the target adopted by the National Bank of Romania and the Government at the end of last year, that of 9%, annual inflation will have to go down 3% in the next five months, which is more than the decrease achieved in one full year.
"Obviously, it is much more difficult to push inflation down to 9-10% from 14-15% than it would be from 20% to 15%. As can be seen in other Central and Eastern European countries, when the economy becomes accustomed to a certain constant level of price increases, it is difficult to push them down," said Lucian Liviu Albu, general manager of the Economic Prognosis Institute of the Romanian Academy.
July's price increases were triggered by higher tariffs for electricity and natural gas, which went up 8% and 5%, respectively. Food products saw prices increases below the monthly average rate.
Such surges diminish confidence in the constant and uninterrupted inflation decline, which is why companies, banks and the general population still display a fear of inflation. Romanian citizens tend to keep their savings in foreign currency, while companies respond by raising the prices of their products. In the case of banks, high interest rates for deposits and credits are maintained.
The recent data is far from reflecting the Romanian officials' expectations.
Before going on vacation, earlier this month, the Finance Minister had expressed optimism about the inflation rate in July: "it may be 0.6%, so that we are still within our 9% target for the entire year," Mihai Tanasescu said at that time.
According to Lucian Albu, "it is clear that the price increases could no longer be 'concealed'. At any rate, there is still hope for the month of August because, as of the autumn, it is very likely that inflation will exceed 1% every month."
"July's inflation is not surprising, because the price of utilities went up. Still, it breaks the pattern that saw inflation going down in the summer months - that is why there must be some conjectural reason, such as the price increases for utilities," suggested economic analyst Liviu Voinea.
sorin.pislaru@zf.ro
Pentru alte știri, analize, articole și informații din business în timp real urmărește Ziarul Financiar pe WhatsApp Channels
