Inflation has surged to 7.8%, pushing Romania's economy back by two year former PM Ciolacu

Former Prime Minister Marcel Ciolacu announced on Tuesday that inflation has surged to 7.8%, thus pushing Romania's economy back by two years and emphasized that this rise significantly reduces the purchasing power of the population, particularly affecting those with lower incomes.

"Inflation has surged to 7.8%, meaning we have, in effect, rolled back progress by two years! This translates into a significant reduction in the purchasing power of the population, especially for those with lower incomes.When I took office in June 2023, I promised to bring it down to single digits from where it stood, at 10.3%. I delivered — reducing it to around 5% through price caps on energy and gas for households and small and medium-sized enterprises. This intervention prevented bankruptcy for 40% of households and over 95% of SMEs. Furthermore, we capped commercial margins on basic food products and provided subsidies that boosted food and energy production. Today, we are witnessing an inflation surge driven by the dramatic rise in energy prices and the increasing bills faced by both Romanian households and businesses. There is also a sharp increase in food prices, largely due to the rising energy costs," Ciolacu stated on Facebook.

He added that the full effects of the VAT increase, which came into force on August 1, have yet to be seen.

"Therefore, the current government must urgently take action: implement the progressive tax system starting January 1, 2026, a measure that would promote social equity and bring 11.4 billion lei to the state budget; provide one-time compensatory payments for low pensioners; increase the minimum wage in line with the rise in the cost of living; and engage in dialogue with ANRE and energy production, supply, and distribution companies to develop a mechanism to halt speculation. No matter how difficult the country's economic situation is, the government cannot stand by idly while the population's purchasing power declines dramatically," he concluded.

The National Bank of Romania (BNR) has revised its inflation forecast upward to 8.8% for the end of 2025, "likely above 9%", from the previous estimate of 4.6%, and anticipates inflation will reach 3% by the end of 2026, compared to the earlier forecast of 3.4%.

Inflation is anticipated to exhibit a temporary spike in September, with levels peaking between 9.6% and 9.7%, and will likely remain above 9% by year-end, according to data presented by BNR Governor Mugur Isarescu on Tuesday during a press conference.

According to these figures, the liberalization of the electricity market on July 1, 2025, will add 2 percentage points to the annual Consumer Price Index (CPI) inflation rate. The VAT increase will contribute 1.6 percentage points, while the rise in excise duties will add 0.4 percentage points.