Romania: Consumer prices tally sharpest drop on record on VAT cut
February 15, 2016
In January, consumer prices fell a notable 0.8% over the previous month (December: +0.2% month-on-month), which marked a first drop after four months of rising prices. January’s large price drop mainly came on the back of January’s cut in the general value-added-tax (VAT) from 24% to 20%. Prior to this, in June 2015, Romania’s government cut the food VAT from 24% to 9%, which has kept inflationary pressures muted ever since.
In annual terms, consumer prices recorded a sharp 2.1% drop in January, which marked the largest fall on record (December: -0.9% year-on-year). As a result, inflation moved further below the Central Bank’s tolerance margin of plus/minus 1.0% around its 2.5% target. On average, consumer prices fell 0.8% in annual terms in January (December: -0.6% year-on-year), marking yet another record-low.