We estimate headline inflation to peak again at around 8.0% in January-February 2024 amid the announced changes to tobacco excise duties and the effect of lifting the cap on commercial food additives. Analysis Department of Erste Bank.

According to economists, the recently introduced excise taxes on sugary soft drinks and the increase in the VAT rate from 5% to 9% on organic food products will have little impact on short-term inflation forecasts. Assuming a full and immediate impact on final prices, they could have an impact of 0.1 percentage point on annual inflation.

Core inflation (the consumer price index excluding fluctuations in food, energy, etc.) – the gauge the central bank prefers when monitoring inflationary pressures – will enter single digits from November 2023 and remain higher than headline inflation for at least the next two years.

Inflation has been a key theme over the past two years globally due to geopolitical tensions and is likely to remain so for the next two years.

“We confirm our year-end inflation forecast of 7.5% for 2023, but expect slightly higher inflationary pressures next year. We expect headline inflation to moderate to around 5.3% by the end of 2024 from 5.0% y/y as we previously estimated.

Our year-end CPI estimate for 2025 is 4.2% y-o-y, still above the upper end of the NBR’s target range of 2.5%±1 ppt. in the medium term.

Our year-end EUR/RON estimates are 5.0 for 2023, 5.10 for 2024 and 5.20 for 2025. Therefore, we expect the depreciation to be gradual (around 1-2% on average per year) as fundamentals should ultimately prevail.

Our estimates show that EUR/RON dynamics have an asymmetric impact on consumer prices, and that a 1% depreciation of the lei against the euro should lead to an increase in consumer prices of around 0.25-0.3% over the next twelve months.