Romania's annual inflation rate was minus 0.9% at the end of 2015, which means that average consumer prices were lower at the end of December compared to the end of the previous year. It is for the first time in the past 25 years when this situation occurs.

In June 2015, the annual inflation rate turned negative, for the first time in the last 25 years, after the VAT rate cut from 24% to 9% on food products and non-alcoholic beverages, starting June 1.

When compared to December 2014, food prices were 6.2% lower, on average, in December 2015, according to data released by the National Statistics Institute (INS). Most food items got cheaper in 2015, including eggs (-11%), raw and processed meat (-10.3%), dairy products (-10.2%), fish (-8.6%), sugar and coffee (-9%). The prices of vegetables, however, went up by 7.6% in December 2015 compared to December 2014 as potatoes were 20% more expensive.

The average prices of non-food products went up by 1.95% year-on-year. The largest year-on-year prices decreases were registered for drugs (-3.9%) while gas prices had the highest increase (+7.5%). Electricity also got more expensive in this period, as well as cigarettes and tobacco, clothing items, and footwear. The services also got more expensive in December 2015 compared to December 2014, by an average 2.41%.

The National Central Bank BNR estimates that the annual inflation rate will remain negative until May this year.

Negative inflation rate in Romania after VAT cut on food

Irina Popescu, irina.popescu@romania-insider.com