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Romania: The annual inflation rate dropped down to 4.56 per cent in July

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The annual inflation rate dropped down to 4.56 per cent in July, from 5.4 per cent in June, while prices for non-food stuffs increased by 6.23 per cent against the same month last year, the food stuffs increased by 3.42 per cent and services by 2.68 per cent, according to data released by the National Institute of Statistics (INS) on Friday, Agerpres informs.

The highest annual inflation rate this year was recorded in May, of 5.41 per cent, which was the highest level recorded since February 2013, when it reached 5.65 per cent.

"July 2018 consumer basket in July went up by 4.6 per cent versus July 2017. The annual inflation rate calculated based on the harmonised index of consumer prices (HIPC) resulted 4.3 per cent. The average inflation rate for the past 12 months (August 2017-July 2018), calculated based on the CPI, was 3.9, as compared with the previous 12 months. When calculated based on the HIPC, the average rate resulted 3.2 per cent," showed the release remitted by INS to AGERPRES.

In July versus June, the consumer basket went down 0.48 per cent, while food stuffs got more cheaper, by 0.8 per cent and non food stuffs got cheaper by 0.55 per cent, with the tariffs for services increasing by 0.24 per cent. Compared with December 2017, consumer basket climbed 1.93 per cent, due to food stuffs becoming more expensive, by 1.4 per cent, and non foods stuffs by 2.53 per cent, while the tariffs for services increased by 1.43 per cent.

The average monthly inflation rate stood at 0.3 per cent for the first seven months of the year, compared with 0.1 per cent, as recorded in the same period of 2017.

The National Bank of Romania (BNR) revised downwards, to 3.5 per cent, from 3.6 per cent, the inflation prognosis for the end of this year, according to an announcement made by the BNR governor, Mugur Isarescu, on Wednesday.

For the end of 2019, BNR is estimated an inflation rate of 2.7 per cent, down by 0.3 percentage points.

"We still have to deal with the inflationary pressures on the economy. We're not jubilating and at the same time we don't say that we won the war. We have just won one battle so far. We have production costs that are significantly higher. In order not to generate inflation and price increases they need to be counterbalanced by productivity. We haven't recorded drops in productivity in Romania yet, but we still need to be very careful for we need that the productivity costs to be at least equal, if not higher than the costs increases or exogenous costs, in order to reach a balance. We also have significantly higher costs in energy, plus the unit labour costs. In time, they could be swallowed by the economy and by the society, but the National Bank has the duty to pull an alarm signal. We are talking here about fundamental balances, and not about such circumstantial balances, and we must be very careful in order to keep them," the BNR government told the conference on the presentation of the Report on inflation.

He said that the excess demand diminished significantly below BNR's last year's forecast.

"This could also bring something less good. The economic growth that we have is no longer of 7 per cent, it's dropping to about 4 per cent. We will see what happens in the following months. If we want a higher economic growth, we need to stimulate the economic potential and not just the demand," mentioned Isarescu.

The BNR governor specified that if we stimulate solely the demand, which will be above the potential, then there are two possible effects: the creation of jobs abroad by increasing imports, in order to cover for the excess demand, and another effect could be inflation.

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