Romania 2010 Inflation Widens To 7.96%, On Sales Tax Rise

Analysts polled by MEDIAFAX had expected the monthly inflation at 0.4%-0.6% in December, and the annual rate at 7.8%-8.1%, from 7.7% in November.

The 2010 inflation came in much higher than the central bank’s target range of 2.5%-4.5%, because of a five percentage point increase in the sales tax introduced in early July. The central bank missed its target for the fourth consecutive year.

A significant boost in the annual inflation was due to large price increases for tobacco products (+26% in 2010) and fuels (+15%), which have a large weight in the consumer price index. The tobacco price increase added 1.24 percentage points to the annual rate, while the fuel price hike put on 1.15 percentage points to the total index.

Food prices increased 0.76% on the month in December, while non-food prices were up 0.55%, the statistics data showed. Services prices were flat month-to-month in December.

Compared with 2009, food prices rose 6.5% last year, on increases for almost all products, except eggs. Vegetables, fruits, edible oil and bakery products posted the largest price hikes in 2010 among the food products.

Non-food product prices rose 9.8% over 2010, mainly due to tobacco, fuel and energy price increases. Service prices were 6.4% higher last year, mainly fueled by increases in the utility, railway transport and telephony tariffs, the data showed.

Romania’s harmonized index of consumer prices, or HICP, stood at 6.1% at the end of 2010, up from 5.8% in November.

In 2009, Romania’s annual inflation was at 4.74%.

For 2011, the central bank targets an inflation of 3% plus/minus one percentage point.