According to the new forecasts issued by the National Bank of Romania (BNR), the annual inflation rate in the country will stand at 6.1% in December, compared with the previously estimated level of 5.5%, and will decrease to 3.4% in December 2027 and to 2.8% in June 2028, compared to 2.9% and 2.7%, respectively, forecast in May for the end of 2027 and March 2028. 

BNR officials part of the monetary policy meeting said that the inflation rate will undergo a substantial downward correction in Q3 2026, amid the exhaustion of the direct effects of the removal of the electricity price cap and the increase in VAT rates and excise duties.

"The annual inflation rate will fluctuate slightly in Q4 2026 and will then resume its decline on a trajectory higher than that shown in the May 2026 forecast, re-entering the target range at the end of 2027, two quarters later than in the previous projection," the same source said, cited by News.ro.

Data published earlier this month showed that the annual inflation rate in Romania fell by 2.2% for the first time in the last twelve months to 8.2% in July.

The annual inflation rate began to decline in June, as anticipated, falling to 10.42%, from 10.85% in May, but remained visibly above the level recorded in the last month of Q1, of 9.87%, given the significant increases in the dynamics recorded during this period in energy and fuel prices and regulated prices.

Board members noted the prospect of a gradual decline in the annual inflation rate starting in Q1 2027, as well as the relatively higher level at which it is expected to stand, particularly in the middle segment of the forecast horizon.

It was also noted that the action of these factors takes on a strongly disinflationary character in Q3 2026, including as a result of lower vegetable and fruit prices. However, until then, higher telecommunications and RCA insurance tariffs, as well as high natural gas and fuel prices, will keep inflation high before coming down again.

Short-term upside risks for the trajectory of Romania’s inflation rate were the evolution of electricity and food prices, amid this year's severe drought, as well as the trajectory of crude oil and other commodity prices, as the war in Iran drags on.

Mild disinflationary pressures were expected from fundamental factors in the near future, BNR board members said, referring to the considerable size reached by the aggregate demand deficit in Q1 2026 and the prospect of its continued deepening over the following two quarters.

The disinflationary pressures from fundamental factors will, however, be felt increasingly strongly over a somewhat longer horizon, BNR officials argued, noting that the aggregate demand deficit is expected to deepen through Q3 2026, thus falling to lower values than previously anticipated.

BNR data also pointed to a sharper decline in private consumption in 2026 than previously forecast, implying a further improvement in the structure of aggregate demand in the current year, in favor of the contribution of investment, with implications also for the evolution of potential GDP over the longer term.

"The annual dynamics of core inflation will, however, continue to be affected in the short term by the indirect effects of higher fuel and natural gas prices for non-household consumers, and will feel the impact of higher telecommunications tariffs and RCA insurance policy prices, as well as the removal of the cap on the commercial markup for basic food products, board members noted," the document stated.

In addition, the dynamics of import prices will probably continue to increase until around the middle of next year, generating, together with the evolution of the leu/euro exchange rate, additional inflationary effects domestically.

Disinflationary pressures will come primarily in 2027 from the base effects associated with the price increases caused this year by the global energy shock.

radu@romania-insider.com

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