Romania is in for higher inflation
Romania’s inflation rate is expected to reach a 9% peak in the end of this year, the country’s central bank has cautioned
Mihai Pelin, 13.08.2025, 14:00
Prices are on the rise in Romania and what people have been seeing for a month now has also been confirmed by the National Institute for Statistics. So, the inflation rate last month went up to roughly 8% from 5.7% in June after the elimination of price caps in energy.
On the other hand, the effects of increased VAT and excises since August 1st, will become visible in September, when the highest price hikes are expected. Referring to the evolution of the inflation rate in the report he is periodically presenting, Central Bank Governor, Mugur Isarescu, says the fiscal measures of reducing the budget deficit endorsed by the government were necessary and brought back the country’s credibility; these measures of curbing state expenses must be continued, although it is going to be more difficult for the government to implement them.
He said the forecast for the end of 2025 will probably exceed 9 percent. The Central Bank chief has underlined the calculated influence over the annual inflation rate from the direction of ending price caps in energy, raised VAT and excises goes up to 4.2 – 4.3 percentage points.
Mugur Isărescu: “We are actually having quite a hump here, which is pretty significant, you know. So, in September, when we are expecting its peak, it will probably be around 9.6-9.7, the highest point of the inflation rate, which will be followed by a period of gradual absorption of these shocks and at the end of next year, not only will inflation be within the targeted figures, but we expect it to be lower than the previous forecast figures.“
The Central Bank governor does not share the opinion of economic analysts who believe Romania is already in recession with unemployment on the rise, but said the risk is real and mainly due to external factors.
Mugur Isărescu: “A good part of Romania’s industry hinges on what is happening in Europe and things don’t look quite good there, you know. Secondly, this massive consumption cut must be offset somehow, so that we may avoid recession, and the EU fund absorption is at stake here.”
Mugur Isărescu says the fiscal measures endorsed by the Executive are a big step forward, but they have to be carried on in conditions of political stability and social equilibrium.
In his opinion, these measures are painful and can cause reactions, but in a year they can lead to a major sustainable economic growth as it happened in 2010. During the previous economic crisis that hit Romania in 2009, authorities resorted to tough austerity measures, which also included pay cuts.
The governor has also said that we cannot speak about Romania’s entry in the Eurozone in the following 5-7 years, after having completed this fiscal correction. Romania renounced such an objective after a political decision had been made to give up a fiscal-budgetary target, Isarescu went on to say.
(bill)
