In January 2025, Romania recorded a 0.9% MoM increase in CPI, with annual inflation reaching 5.0%. While the new state budget targets an average annual inflation rate of 4.4%, the government must still decide whether to extend energy price caps while balancing budget deficit reduction and economic stability. Additionally, although peak wage increases have passed, sticky wages are expected to continue exerting upward pressure on inflation.
Compared to the previous month, January saw another increase in consumer prices, with the CPI rising by 0.9% compared to December 2024. On an annual basis, inflation in January stood at 5.0%, reflecting a slight decline of 0.1 p.p. from the previous month. Additionally, the 12-month average inflation rate (February 2024 – January 2025) compared to the preceding 12 months registered a 5.4% increase, marking a 0.3 p.p. decrease from December’s 12-month average. This decline was partly attributed to the exclusion of January 2024 from the calculation, when CPI reached 7.4%.
Romanian CPI YoY growth rate (January 2019 – January 2025, %)
Source: Romanian National Bank, InterCapital Research
Breaking down the data, services registered the highest annual increase at 6.5%, followed by non-food goods at 4.6% and food goods at 4.5%. On a monthly basis, services prices and non-food goods prices both rose by 1.0%, while food goods saw a 0.8% rise.
According to the newly adopted state budget for 2025, the average annual inflation rate is expected to amount to 4.4%. This would represent a notable decline from the 2024 average of 5.6% but remains significantly above the National Bank of Romania’s target of 2.5%. However, these projections could be influenced by the government’s decision regarding the capping-compensation scheme, which is set to expire on 1st of April. The government is still considering an extension while evaluating various scenarios.
Additionally, the country continues to struggle with a high budget deficit, which reached approximately 8.6% of GDP in 2024. The 2025 budget aims to reduce this to 7%, but several inflationary pressures remain, particularly due to increases in pension and wages. Public sector salaries are set to rise by 3%, remaining below the projected inflation rate, while the public pension budget is expected to increase by 10.7%, reaching 7.9% of GDP.
Regarding wages, the average net earnings in December 2024 stood at RON 5,645, reflecting a 4.8% increase compared to November. This rise was largely driven by occasional bonuses such as quarterly and annual bonuses, winter holiday bonuses and 13th salary payments. In the public sector, net earnings saw moderate monthly increases in public administration (+1.3%) and human health and social work activities (+1.1%). The healthcare sector, set to receive a 30% budget increase in 2025 to enhance medical services and infrastructure, is expected to experience stronger wage growth compared to other public sectors. Meanwhile, average net earnings in education fell by 2.5% MoM due to reductions in hourly payments for teaching staff during school holidays. On an annual basis, average net earnings increased by 11.1% compared to January 2024, underscoring the persistence of wage-driven inflationary pressures.
Evolution of net average earnings (December 2023 – December 2024, in RON)
Source: Romanian National Institute of Statistics, InterCapital Research
In conclusion, Romanian inflation is unlikely to subside in the near term, as the government grapples with the dual challenge of reducing the budget deficit while maintaining economic stability. The decision on energy price caps will further impact inflationary trends. Moreover, although peak wage increases may be behind us following the super-election year, sticky wages continue to exert upward pressure on inflation. Even if inflation and deficit targets are met or exceeded in 2025, interest rate cuts are yet to start, indicating that inflationary pressures in Romania will persist in the short to medium term.
