The inflation rate will stay negative on an annual average until the end of next year, and will return to plus only in 2017, according to the economists of Banca Transilvania.

The bank revised down its prognosis after the National Institute of Statistics (INS) announced that the consumer prices dropped by 1.9% in August compared to last year on the VAT rate cut on food from 24% to 9%, and the new Fiscal Code law was approved, which means that the general VAT rate will drop from 24% to 20% next year.

Banca Transilvania previously estimated that the average inflation rate will reach 0.7% in 2015, and later changed it to -0.3%. It also revised down the inflation estimation for the next year, from 1.52% to -0.6%. In 2017, inflation will have an annual rate of 0.6%, the bank’s economists say, down from 1.49% as initially estimated.

The average inflation in the first eight months of the year amounted to -0.2%, according to INS. Despite the negative inflation rate, analysts say that Romania’s central bank will not continue to cut the monetary policy interest rate. On the contrary, the BNR may increase the interest rates, to temper the strong growth in consumption, according to Erste group.

editor@romania-insider.com