According to the latest release by the Romanian National Institute of Statistics, Romania’s CPI grew by 0.3% MoM, and 6.6% YoY in December 2023.
Consumer price indices, CPI, the most widely used indicator of inflation in a country, remain elevated in Romania. In fact, in the latest press release by the Romanian National Institute of Statistics, the country’s CPI increased by 0.3% MoM and 6.6% YoY. The inflation rate in Romania remains elevated, due to several factors that have to be pointed out. Firstly, Romania uses its own currency (Leu). While this allows the Romanian Central Bank a greater measure of control than the Eurozone countries which the ECB directly influences, it also leaves the currency in a more “volatile” position. This is because even though countries that use the euro have less control over their monetary policy, the euro is still by far one of the strongest currencies in the world. Romanian currency on the other hand, while quite stable as compared to the Euro, can face larger volatility due to the fact that only Romania uses it.
Secondly, this means imports from the EU or the US have to be paid in their respective currencies, meaning any inflation experienced by those countries also spills over to Romania. Thirdly, inflation rates have historically remained elevated above the 2% target usually set by central banks around the world. Lastly, given the prominence of the Energy sector in the Romanian economy, fluctuations in energy commodity prices also have an effect on inflation.
For Romania, CPI continues to rise on the MoM basis but has been consistently declining on a YoY basis since November 2022, when it reached the highest level (16.8% YoY) in years, indicating a cooldown in inflation.
Romanian CPI (January 2020 – December 2023, YoY, %)
Source: Romanian Statistical Office, InterCapital Research
In terms of the Harmonized Index of Consumer Prices (HICP), which allows us comparisons to other European countries, Romanian recorded MoM growth of 0.2%, and a YoY increase of 7% in December 2023. This would mean that Romania recorded the highest HICP levels of all the observed European countries, followed by Slovakia at 6.6%, Austria at 5.7%, Croatia at 5.4%, and Estonia, at 4.3%.
HICP comparison with select European countries (December 2023, %)
Source: National Institute of Statistics, Eurostat, InterCapital Research
Moving on, in terms of the CPI growth drivers, on a MoM basis, Food goods’ prices increased by 0.3%, Non-food goods by 0.1%, and Services by 0.7%, leading to the aforementioned 0.3% growth in MoM CPI. On the other hand, on a YoY basis, Food goods recorded 5.8% price growth, followed by Non-food goods at 5.5%, and Services at 11.2%, leading to the 6.6% YoY inflation.
A more detailed breakdown of the Romanian December 2023 CPI is available here.
