Romania prolongs food price capping mechanism until the end of year

President Klaus Iohannis promulgated a law on March 27, prolonging until the end of the year the mechanism of capping the commercial markups charged by manufacturers, distribution companies, and retailers of specific basic food goods.

The Social Democratic Party (PSD) issued a press release saying that "the PSD's decision comes following a large number of requests from citizens to maintain the limitation of the commercial markups to basic foods - this being the best proof of the effectiveness of the measure promoted by the PSD," G4media.ro reported.

The opinions on the outcome of the mechanism are mixed. While the central bank admits some statistically relevant decrease in the price of food goods, the impact on the general standard of living is rather moderate. Analysts suspect those targeted by the mechanism are increasing their markups for goods out of the mechanism's scope, such as to preserve their overall profitability. However, no quantitative evidence was provided on this.

The mechanism was set in place last summer and prolonged for periods of one to three months. The nine-month prolongation is the longest so far.

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