Fiscal measures and international risks driving price rises

The National Bank of Romania (NBR) confirms fears about the impact of the fiscal measures implemented by the Government since 1 January. During its meeting on 8 November, the NBR board reviewed and approved the Inflation Report, November 2023 edition, highlighting significant uncertainties and risks regarding inflation developments in the coming quarters.

According to the NBR, quoted by ProTV,  the new taxes will contribute to higher inflation, increasing financial pressure on Romanian consumers. The updated forecast points to an increase in the annual inflation rate at the beginning of next year, driven by tax increases and introductions. However, a gradual decline is expected in the following quarters, with an acceleration of the reduction in 2025.

In addition to fiscal measures, significant risks also stem from the evolution of oil prices in the context of the Middle East conflict. The NBR management points out that uncertainties are also heightened by the future stance of fiscal policy, including possible wage increases in the public sector and new pension and wage legislation.

The war in Ukraine and the Middle East conflicts are additional factors that pose risks to the inflation outlook. At the same time, the NBR notes that the absorption of European funds is crucial to counterbalance the contractionary impact of supply-side shocks, with a vital impact on structural reforms and the energy transition.