According to the latest release by the Romanian National Institute of Statistics, the country’s CPI grew by 0.4% MoM, and 6.6% YoY in March 2024.
Yesterday, the Romanian National Institute of Statistics released the CPI read for Romania, for March 2024. According to the release, Romanian CPI increased by 0.4% MoM, and 6.6% YoY, marking one of the highest inflation rates in Europe, and higher than all the countries in the Eurozone. Of course, while having its currency (lei) allows Romania to control its monetary policy as compared to individual Eurozone members who all use the euro, it also means that Romanian currency is used by a relatively smaller market, and any foreign exchange changes which wouldn’t affect countries who use the euro affect Romania more harshly. However, it should be noted that the Romanian Central Bank has been quite consistent with keeping the exchange rate of RON 5=1 euro (1 RON=0.2 euro) for quite a while, and interest rates are higher than the ones set by the ECB, meaning that it is unlikely that the currency would depreciate.
Romanian CPI (January 2020 – March 2024, %)
Source: Romanian National Institute of Statistics, InterCapital Research
Looking at the growth drivers, on a MoM basis, Food goods increased by 0.25%, Non-food goods by 0.57%, while services grew by 0.35%. On an annual basis, Food goods grew by 2.8%, Non-food goods by 8.1%, while Services increased by 10.2%. Comparing the Romanian inflation to the other European countries by using the harmonized index of consumer prices (HICP) we can see that the Romanian HICP increased by 0.45% MoM, and 6.7% YoY.
Comparison of Romanian HICP with other European countries (March 2024, YoY, %)
Source: Romanian National Institute of Statistics, Eurostat, InterCapital Research
As we can see, Romania is at the forefront of the YoY HICP growth, followed by Croatia at 4.9%, Austria at 4.2%, Estonia at 4.1%, and Belgium at 3.8%.
Comparison of Romanian HICP with other European countries (March 2024, MoM, %)
Source: Romanian National Institute of Statistics, Eurostat, InterCapital Research
Meanwhile, on a monthly basis, Romania was quite low on the list, with comparable MoM HICP to Slovenia, Austria, Netherlands, and Germany, all at 0.6% increase MoM, as well as Belgium and Estonia, both at a 0.4% increase MoM.
In summary, Romanian inflation is above many of the European countries, which means that it is unlikely that the Romanian Central Bank will reduce the deposit interest rates (currently at 7.0%) until the inflation comes down further. While higher inflation is expected in a country with its own currency, especially in periods of macroeconomic and geopolitical uncertainty, March’s CPI print shows there are still ways to go before inflation is fully under control.
