Fuel prices will continue to go down next year, but food and cigarettes will become more expensive, according to the central bank’s latest report on inflation, which also takes into account the effects of the general VAT rate cut from 24% to 20% starting January 1, 2016.

The fuel prices should go down further next year, thanks to the VAT rate cut, after they have already declined significantly this year, on lower international oil prices. Romania’s National Bank (BNR) estimates a 2.2% decline in fuel prices in 2015 followed by another 2.3% drop in 2016.

However, BNR expects the volatile food prices to go up next year by 6.2%, as the base effect of the VAT rate cut on food will disappear starting June 2016, and the agricultural production was lower in 2015 compared to 2014. Cigarette and alcoholic beverages are also expected to get more expensive next year, as the effect of the VAT rate cut will be cancelled by higher excise duties.

Overall, BNR expects a positive annual inflation rate of 1.1% at the end of 2016, compared to a 0.7% decline in consumer prices at the end of 2015.

editor@romania-insider.com