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- 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
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