Inflation Rate Doubled in 2010

In 2010 there was a 7.96 percent inflation rate, after the 0.5 percent price rise in December, and the level was almost double the one in 2009, especially because of the VAT increase and price rises for food, fuel, tobacco and services, Mediafax informs.

Thus, 2010 becomes the fourth year that the National Bank of Romania (NBR) fails to reach the inflation target set at 3.5 percent give or take one percentage point. In 2009 there was a 4.74 percent inflation rate, while the target interval was set between 2.5 and 4.5 percent.

Last year, it was the 26.34 percent price increase in tobacco and the 15.38 percent price increase in fuel (which are weighting factors in the National Institute of Statistics (INS) basket) that had the hardest impact on consumer prices.

According to the INS, the fuel price rise had a 1.15 percentage point impact on the annual inflation rate, while the tobacco price rise had a 1.24 percentage point contribution.

The prices for all food products, except for eggs, increased last year, and the potatoes price registered the most notable increase.

For 2010, the Central Bank revised its inflaton forecast multiple times, taking into account that in July the Government decided a VAT increase from 19 percent to 24 percent.

NBR Governor Mugur Isărescu declared at the end of last year that the Central Bank estimated the impact of the VAT increase on inflation at over 2.4 percentage points.

Inflation is among the criteria set by the external financing agreement worth 20 billion euro that Romania signed with the IMF.

At the same time, inflation is among the convergence criteria that Romania has to meet in order to join the eurozone.

Translated by: Gabriela Lungu

MA Student, MTTLC, Bucharest University