Romania reaches the highest inflation in the European Union

[Cybele]

• The inflation increased to 7.4% in January 2024, from 6.61% in December of 2023

• This is the highest figure in all the EU, with 4.3% above the EU average of 3.1%

• This figure is the direct result of the tax increases which took effect on January 1st 2024, tax increases which significantly slowed down the decrease of inflation. Also, a result of the indexation of pensions (2024 is an electoral year and there are nearly 5 million pensioners in Ro, who’s votes count). All these happened, despite previous warnings from the specialists.

• Romania has one the highest energy and gas prices for the business environment and population in Europe, even though the energy is locally produced and the country has reserves of natural gas. The increase in energy price has affected industrial production, which now reached the level of the one from 2015, so a regress. Also, the taxes for micro-enterprises tripled starting this year.

• The capping scheme for trade markup for basic foods (like flour, oil and cornmeal), has not stopped the rise in inflation and is very likely responsible for other price increases. Because chain stores had to limit the selling price for these products, so they recovered their money elsewhere. This explains the price variation for other products that are still very necessary, that allow traders to recover what they lose, for what they are forced by the state to limit the price.

• Prices for detergents for example increased by 22,60%, medicines by 14,93%, books, newspapers and magazines by 12,95% in January 2024, compared to January 2023

The tax increases applied since the beginning of the year and the indexation of pensions have "reignited inflation" in Romania. "Probably, Eurostat will confirm this, that it will be the largest in Europe in January," said economic analyst Adrian Negrescu, live on Euronews Romania.

For his part, the economic analyst Bogdan Glăvan warned that Romania could face a new inflationary crisis in September, when there will be a new pension increase.

Adrian Negrescu explained that there are several factors that contributed to the increase in inflation to 7.4% in Romania:

"We have been talking for months, about the fact that these tax increases that we are imposing from January 1, will generate inflation. Even Mugur Isărescu (governor of the National Bank of Romania) told us since the fall, that from January 1st, we will have price increases.

In addition to these tax increases, we also have the increase in the minimum wage in the economy, the increase in excise duties on fuel, to alcohol beverages, to cigarettes. All these put together, added fuel to the fire of inflation.”

Analyst: We spend the most money on food and essential services in Europe

Negrescu highlighted that the inflation rate "is still very high because these price increases are added to the previous increases".

"The cumulative inflation over the last two and a half years is about 30%. When you go shopping, how much did you spend two years ago, on a minimum consumption basket and how much do you spend now?

The expenses are fantastic compared to the income of the population. Eurostat says we spend the most money on food and essential services in Europe, not because we have a very high appetite to eat more or spend more. Quite simply, we have European prices and Romanian salaries", said Negrescu.

"There are two factors that have reignited inflation. One is represented by tax increases, and the other is related to income increases, i.e. indexation of pensions. Let's not forget to talk about an increase of about 13% in incomes for five million citizens, pensioners, that is, a considerable part of society has higher incomes.

In September, when three million pensions will increase more or less considerably, we will again see an inflationary push", warned Glăvan

We are actually in stagflation, meaning an economic slowdown close to zero. The economy is on the handbrake and we still have price increases. That is the clear definition of stagflation.

Probably at the end of March, we will have two consecutive quarters of economic decline and that means a technical recession.

I am very curious what measures the politicians will propose to us. I can't wait to see, including in the electoral campaign, to get Romania out of this economic situation, that is expected to be extremely difficult from the perspective of the next two to three years", Negrescu said.

Capping food prices has not stopped the rise in inflation

Asked if the Government's decision to cap the prices of some basic foods could have slowed down inflation, economic analyst Bogdan Glăvan explained that this phenomenon is caused by "excessive state spending mainly which is validated in an expansion of the money supply" and warned that "in the first month of the year we will be European champions" in terms of inflation.

Spending cuts could stop rising inflation

"The main measure is to reduce the public expenses that have increased dramatically in recent years on some bases that are not real. (...)

Special pensions, salaries of state workers. We started to have more and more employees. We have doubled the number of employees compared to seven years ago. We have expenses with budgets that are much higher than in Poland", concluded Adrian Negrescu.





https://www.euronews.ro/articole/rom...ist-avem-pretu

[protos]

See how the most anti-Russian countries have the highest inflation? The less anti-Russian you are, they better you're off

[Cybele]

See how the most anti-Russian countries have the highest inflation? The less anti-Russian you are, they better you're off

Maybe the help provided to Ukraine, had an economic impact too. But still, in our case is more than that.

[protos]

Maybe the help provided to Ukraine, had an economic impact too. But still, in our case is more than that.

I think its all related to that. Sending military aid to Ukraine, sanctions and basically closing market for Russians. I doubt this is related to post-COVID economic effects. You essentially shoot your foot.

[Scarface F]

See how the most anti-Russian countries have the highest inflation? The less anti-Russian you are, they better you're off

It's not related. This is data just for January 2024.

In last few years, Hungary had highest inflation in the EU.

[Brás Garcia de Mascarenhas]

Inflation is a widespread phenomenon throughout Europe, as this map shows, although it has slowed down a little in the last quarter compared to the previous year. In Romania's case, it's a combination of inflation resulting from the war that affected the whole world, but also boosted by advances in the economy and wage increases in recent years. When salaries grow at a rate of 10 to 15% over the last three years, as in the Romanian case, inflation is to be expected, and combined with the current situation, these figures tend to extrapolate a little further.

[protos]

It's not related. This is data just for January 2024.

In last few years, Hungary had highest inflation in the EU.

Its possible, I did not check economic data lately.

[Cybele]

I think its all related to that. Sending military aid to Ukraine, sanctions and basically closing market for Russians. I doubt this is related to post-COVID economic effects. You essentially shoot your foot.

We were trading with Russia before the war, but they were not main partners.


Anyway, the inflation was decreasing in Romania, until the Government decided to increase various taxes and pensions. Though they've been warned beforehand.
Also, the price of energy (locally produced) has increased a lot and this had impact on the whole industry.

[protos]

We were trading with Russia before the war, but they were not main partners.


Anyway, the inflation was decreasing in Romania, until the Government decided to increase various taxes and pensions. Though they've been warned beforehand.
Also, the price of energy (locally produced) has increased a lot and this had impact on the whole industry.

Do you use a lot of energy produced by thermal power stations? Because it would make perfect sense to see rise in price of energy if you replaced cheaper Russian derivatives with American. Also in automobile industry, or in agriculture everything that was running on cheaper Russian oil now runs on more expensive American. That also includes products such as grains, fruits, vegetables, etc. as the industrial machines need fuel.

[Cybele]

Do you use a lot of energy produced by thermal power stations? Because it would make perfect sense to see rise in price of energy if you replaced cheaper Russian derivatives with American. Also in automobile industry, or in agriculture everything that was running on cheaper Russian oil now runs on more expensive American. That also includes products such as grains, fruits, vegetables, etc. as the industrial machines need fuel.

We use some but they make less and less percentage of the production. We rely more on hydroelectric ones. The thermal power plants run on lignite and coal. We have local coal deposits and mines. Over 60% of the coal production goes to eight thermal power plants that produce heat and electricity: Mintea, Paroșeni, Rovinari, Iași II, Craiova II, CET Govora, Ișalnița and Turceni.

But since we’re transitioning to green energy, these will have to close in the future, because they are considered too polluting according to EU.

According to a report prepared by ANRE on September 30, 2022, electricity in Romania is composed of 36.3% of hydroelectric energy sources, 16.9% coal burning, 16.5% wind energy, 14.3% hydrocarbons and gas, 7, 7% nuclear energy sources, 7.6% solar energy sources and 0.7% biomass.

Some reasons for price increase of energy, might have been market liberalization, EU’s Green Deal and so on.
Another explanation I found:
Prices on the spot market in Romania were much higher even before the energy crisis, especially for electricity. If in Western countries, a MWh of energy cost 50 euros, in Romania it constantly exceeded 200 euros / MWh. The prices were huge, before the crisis, because the electricity producers aligned themselves with the Oltenia Energy Complex, which sells the most expensive energy. There were maneuvers on the market encouraged by the Romanian state to keep alive, artificially, the most expensive electricity producer in Romania.

We import most of the oil from countries like Kazakhstan, Libia, Irak, Azerbaidjan, Saudi Arabia, etc.