The inflation rate is going down

The inflation rate went down to 5.12% in May from 5.9% in April, reaching the lowest level in the last three years.

Daniela Budu, 13.06.2024, 13:50

The annual inflation rate went down in Romania to 5.12% in May from 5.9% in April, says the National Institute for Statistics. This is the lowest level in the last three years. The price went down of such food products as milling and bakery products, vegetables, potatoes, oil and butter, as well as electricity and natural gas, by 8%. Non-food product, however, have become more expensive, including shoes, furniture and cleaning products, as well as services, especially air travel, rising on average by 20%. Economic analyst Bogdan Glăvan says the inflation rate has gone down especially because the shock caused by the rising energy prices is wearing out, something seen all over the world:

“In other countries, the inflation rate has gone down faster than in Romania, because we also have domestic problems leading to higher prices, namely exaggerated public spending. Coming back to energy, what happened in 2022 is happening again, but the other way round. The decrease in energy prices will slowly lead to lower inflation and more stable prices. The only question is: how fast? So, we are seeing that the energy is becoming cheaper. This month we’ve also seen food prices stabilising or even slightly going down, something also driven by the international context. Around the world, the price of food has been going down for months so it was only natural that this would eventually also be seen in Romania.”

In the coming period, economic analyst Bogdan Glăvan expects Romania to see some stability with respect to inflation and for some prices to go down, because he says, the price of food is also a matter of seasonal factors and food prices are usually lower in summer. He emphasises that prices will continue to go up in areas hit by inflation later, such as services, where we are seeing an inflationist trend. Bogdan Glăvan explains:

“In the energy sector, prices are going down, as well as in the food sector. All this pushes the inflation down. There are still problems in the rest of the sectors that were hit later by rising inflation. So, if the inflation rate went up in the energy sector, this was gradually reflected in the economy, affecting all the other sectors, including services. And it’s in this latter sector that we’re seeing this last inflationist trend.”

Recently, the National bank of Romania revised its previous inflation forecast for the end of the year up to 4.9% from 4.7% and only expects it to reach 3.5% at the end of 2025. The Bank’s governor Mugur Isărescu said recently that the inflation rate is on a downward path, but that the decrease would be gradual and explained that the bank’s monetary policy aims to reach a balance that prevents bouts of inflation or recession.