The annual inflation rate could return to positive territory in the first quarter of this year, as the effect of the VAT rate reduction from 24% to 20%, starting January 1, 2016, begins to fade, according to a press release issued by Romania’s National Bank (BNR).

The subsequent increase in the inflation rate will be relatively slow mainly due to disinflationary shocks occurred between November 2016 and February 2017. They consisted of lowering tariffs for the mandatory car insurance policies (RCA) and the removal of some non-fiscal taxes.

Besides that, the cut of the VAT rate from 20% to 19% and the removal of the extra excise duty on fuel, starting January 1, also play a role in keeping the inflation rate at a low level.

Romania’s National Bank decided yesterday to keep the monetary policy rate unchanged at 1.75% per year.

The annual inflation rate increased to -0.54% in December last year from -0.67% in the previous month.

editor@romania-insider.com