In June the VAT reduction measures by 9 percent have led to a decrease in food product prices, therefore bringing inflation down.

 

“As of June 1, 2015, the extension of the reduced VAT rate by 9 percent came into force for the delivery of food and drinks. Assuming this tax change would have been entirely transferred since it took effect, we can say that 3.5 percentage points of the 1.6 percent decrease registered by the annual rate of the consumer price index (CPI) in June 2015 is due to the reduced VAT rate. The share of products that were affected by this reduction and were included in computing the CPI is 27.9 percent,” shows the INS study.

 

Compared to the previous month, food product prices have lowered by 8.2 percent, while year on year the decrease was of 6.4 percent.

 

Prices lowered most for potatoes (down 14.6 percent), corn flour (down 12 percent) and cow’s milk (down 11.5 percent). The smallest price reductions were recorded for wine (down 0 1 percent) and beer (down 0.9 percent). This excludes baked goods, which have not registered significant price reductions, given that they already had had a VAT rate reduction.

 

Year on year, food prices fell by 6.44 percent and had a 6 percent drop when compared to December 2014.

 

Compared to May, prices were reduced by 0.2 percent in “other non-food products” and by 0.03 percent in detergents. On the other hand, increases were recorded for cars and spare parts (up 0.3 percent) and watches (up 0.2 percent).

 

Year on year, non-food products prices rose by 0.76%, while compared to December 2014 they grew by 1.6 percent.

 

In services, as compared to the previous month, the prices in restaurants, cafes and canteens decreased by 1.22 percent, while “other services” dropped by 1.06 percent. For water services, sewage and sanitation, prices rose by 0.9 percent, interurban transport prices grew by 0.6 percent and telephone services by 0.5 percent.

 

Year on year services rose by 2.5%, higher than the increase by 1.2 percent compared to December 2014.

 

National Bank governor, Mugur Isarescu, had predicted the drop in inflation data for June.

 

 

“In a few days the inflation index will be published and we will see a price drop of over 2 percent. So we have a drop of two points in a month, in the context of talks about bill increases due to currency depreciation. And the annual index, which is currently at 1 percent or so will most likely drop to minus one point percent,” said Isarescu. (source: business-review.eu)