Negrescu: Romania has passed inflation peak, rate could fall to 5.5 pct in autumn

Romania has passed the peak of inflation, and the rate could fall toward 5.5% in autumn and even 5% by year-end if the new government avoids measures that fuel price increases, economic consultant Adrian Negrescu said.According to data published Wednesday by the National Institute of Statistics (INS), annual inflation dropped to 8.16% in July from 10.42% in June, with services up 13.67%, non-food goods 7.93%, and food goods 5.03%.Negrescu said the latest figures confirm a turning point: "If the new government maintains this trajectory - meaning it does not take measures that stimulate price increases - we could see inflation around 5.5% in autumn, maybe even 5% toward the end of the year, as the National Bank also estimates," he said. Prices will not fall, Negrescu added, but will rise at a slower pace than in the past two years.He noted that the slowdown is most visible in food prices, driven by weaker sales and declining purchasing power. "It's good news, especially for food products, where we see a generalized price drop compared with June. This shows we've reached the bottom of the barrel. Falling sales and reduced purchasing power have pushed retailers to use promotions, discounts and assortment changes to offer cheaper products and keep sales afloat." The expert argues that this confirms a trend he anticipated in spring: inflation-driven erosion of purchasing power is reshaping pricing strategies in Romania.One major uncertainty remains fuel prices. "The big question mark is the evolution of fuel prices. With the war in the Middle East, they can significantly influence inflation in the coming months, though not by a very large percentage." Even a possible rise in energy prices this autumn would have a limited impact, he explains, because base effects have faded.Negrescu expects no repeat of last year's extreme price surges. "We will not see spectacular price increases like last year, when energy grew almost 80% more expensive and pushed Romania to record inflation at European level in 2025 and early 2026. Potatoes and fresh fruit are starting to get cheaper. Services are no longer rising as fast as in previous months. We've reached the end of the line in terms of price hikes - the economy is now absorbing all the increases from the past 24 months."On electricity, he anticipates a possible 10 - 15% price increase this autumn, but with a smaller inflationary impact than in 2025. "What we can do is protect ourselves - households and companies should renegotiate their energy supply contracts to secure a fixed price for the next 12 months."Fiscal policy is another risk. "Another big question mark concerns fiscal developments. What will the new government do? If taxes are raised again, I fear the prospect of inflation falling toward 5.5%, as the National Bank estimates, could be shattered by the effects of a fiscal increase."A potential VAT hike to 24% would be damaging, he warned. "An increase of VAT to 24% would be, in my view, a kind of economic seppuku for Romania. It would reignite inflation and push the competitiveness of Romanian companies to a historic low in the past 15 years." He urged politicians not to fall into the temptation of raising taxes to finance public-sector wage hikes, next year's pension increases and child benefits.Despite risks, Negrescu sees signs of economic recovery emerging. "I'd say we see the light at the end of the tunnel. The confirmations from Moody's and Fitch regarding Romania's rating, the drop in inflation and the trend toward 2.9% in 2027, as the National Bank estimates, will create the prerequisites for an economic rebound that we will probably start to feel in the last months of this year," Negrescu concludes.