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2023/11/06 / Erste Group Research

Romania Special | Inflation forecast update

Inflation has been the key macro topic for the past two years around the globe due to elevated geopolitical tensions and it is likely to remain so over the next couple of years. Hence, we decided to release an updated outlook on Romania inflation rate, due to some changes in forecast assumptions (for 2024, in particular).

We reaffirm our year-end inflation forecast at 7.5% for 2023, but we now expect slightly higher inflationary pressures next year. Headline inflation is now projected to decline to around 5.3% by end-2024 vs the 5.0% y/y previously. Our year-end CPI estimate for 2025 stands at 4.2% y/y, still above the upper bound of the NBR’s target range of 2.5%±1pp over the medium term.

Headline inflation is now projected to peak again near or above the 8.0% y/y during January-February 2024 amid the announced changes in excise duties for tobacco products and the assumed reverse effect coming from elimination of markups cap on basic food products. The short-term inflation outlook is likely to be only slightly affected by the recently introduced excise duties for non-alcoholic drinks that contain added sugar and VAT rate hike from 5% to 9% for organic foods. Assuming a full and immediate pass-through into final prices, these could have an impact of 0.1pp on the annual figure.

Core inflation (CPI less administered, volatile food and fuels, tobacco, and alcohol), the central bank’s preferred gauge for tracking underlying inflation pressures, is projected to enter a single–digit territory starting with November 2023 and stay above headline inflation at least over the following couple of years.

In our view, the uncertainties surrounding our inflation projection remain in place over the short term and depend on both domestic and external factors. Ongoing wars in Ukraine and Israel are still playing a major role, with potential adverse effects on international energy and food prices. Additional new measures enforced by the government to ease burden from still elevated consumer prices can not be excluded in the short term, especially in the context of heavy elections calendar in 2024.

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General information

AuthorErste Group Research
Product nameCEE Economies Special Report
Topic in focusFX, Macro/ Fixed income
Economy in focusRomania
Currency in focusRomanian Leu
Sector in focus-


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