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23
January

The inflation rate in Romania during the 1990ies and the first years of this decade is best to be described as a devastating hyperinflation. Inflation was mainly caused by the Romanian’s incapability to collect taxes (and, hence, financing their immense current spending with Seignorage) and a protective exchange rate regime. The still high inflation rate in the first years after 2000 in Romania was mainly a fading out. However, in recent years Romania joint the regime of inflation targeting and left the days of double-digit inflation behind.



Yet, inflation in Romania is still on the very high side of the EU. The year of the financial crisis did not change this trend, but kept inflation on a lower level. Main drivers for inflation in recent years may be described as a kind of Balassa-Samuelson effect as prices tend to grow faster than productivity levels, a massive amount of worker’s remittances, which might reach up to 5% of GDP (2008) strong internal demand in recent years. As the both latter factors have been significantly reduced during 2009 inflation is expected to further temper down during the next years.

 

A current forecast by the CNP sees Inflation in Romania for the next years as follows:

Table: Inflation Rate – Forecast 2008 – 2014

Inflation Rate / Year 2008 2009 2010 2011 2012 2013 2014
Romania 6.3 4.5 3.5 3.2 2.6 2.3 2

Source: CNP, 2009

It remains to be seen if these figures will be met. In the past Romania rather used to fail inflation targets.

Romania: Inflation – Data Series and Comparison

The following tables rely on Eurostats data. For benchmarking purposes we provide also EU-Data, as well as inflation figures for the Netherlands, our reference economy for Romania (as it is about the same population size) and Poland as a representative member for other Eastern European economies.

Table: Romania – Inflation Index 2000 – 2009 (HCPI)

Inflation Index / Year 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009*
EU 27 88.45 91.28 93.58 95.59 97.77 100.00 102.31 104.73 108.56 109.61
EU 25 89.80 92.04 94.00 95.83 97.88 100.00 102.20 104.55 108.25 109.19
EU 15 90.29 92.27 94.19 96.03 97.91 100.00 102.19 : : :
Netherlands 87.06 91.51 95.05 97.18 98.52 100.00 101.65 103.26 105.54 106.57
Poland 87.4 92.0 93.8 94.5 97.9 100.0 101.3 103.9 108.3 112.6
Romania 43.15 58.02 71.09 81.94 91.68 100.00 106.60 111.84 120.69 127.43

Source: Eurostats, Base year = 2005, an * denotes estimates

The index data above shows well enough, that Romania is still well below all comparison levels when it comes to inflation in the EU. Nonetheless, we can also observe that inflation decelerated and left the years of double digit inflation rates behind.

Table: Romania – Inflation Rate 2000 – 2009 (HCPI)

Inflation Rate / Year 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
EU 27 3.5 3.2 2.5 2.1 2.3 2.3 2.3 2.4 3.7 1.0
EU 25 2.4 2.5 2.1 1.9 2.1 2.2 2.2 2.3 3.5 0.9
EU 15 1.9 2.2 2.1 2.0 2.0 2.1 2.2 : : :
Netherlands 2.3 5.1 3.9 2.2 1.4 1.5 1.7 1.6 2.2 1.0
Poland 10.1 5.3 1.9 0.7 3.6 2.2 1.3 2.6 4.2 4.0
Romania 45.7 34.5 22.5 15.3 11.9 9.1 6.6 4.9 7.9 5.6

Source: Eurostats; Base year = 2005, an * denotes estimates

Inflation rates for Romania and our reference economies as measured by the Harmonized Consumer Price Index (HCPI) and its annual change rates. Though Romania made considerable progress in this regard there is still a long way to go until European (even Eastern European) standards can be met.

Category : 2010 / economy / Economy of Romania / Inflation Rate / News

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