Government loses inflation fight, prices up 1.5% in October

The consumer price index went up 1.5% in October, mainly due to the 3.9% increase in the price of services, according to the National Statistics Institute (INS). During the same interval, the price increases for foodstuffs (+1.2%) and non-foodstuffs (+1%) remained below the average growth.

Prices surged in October for telephony ((8.1%), postal services ((9.8%), railway transportation ((5.2%), urban transportation ((3%), rents ((2.7%), books, newspapers and magazines ((5%), tobacco and cigarettes ((2.1%), leather footwear ((2.1%), eggs ((5.3%), milk ((2.3%) and bread ((2.2%).

Prices have climbed 11.2% since the beginning of the year and 15.8% since October 2002. The Romanian Government had targeted an inflation rate of at most 14% for this year.

Analysts estimate the inflation rate will amount to some 14.5% by yearend, at least 0.5% above the level forecast by the Government and the National Bank of Romania, as the INS announced 11.2% inflation for the ten months this year. “Given the figures released for October, the inflation target is unlikely to be met, and will probably range between 14.3%-14.7% by yearend,” Radu Craciun, senior analyst at ABN Amro Romania said.

Failure to stick to the disinflationist programme is blamed by economists on the excessively relaxed wage policies, mainly in the State sector, the poor agricultural yield and the tarrif increase for utilities.

“As the structural rigidity still persists at the economic level, such price adjustments are rapidly forwarded to the final prices’ level,” Radu Craciun explained.

When speaking of excceding the 14% target, analysts quote the record inflation rate generally posted in the final two months of the year.