Not wallet-friendly. The widespread price increases can be felt from the first of the month
Fotó: Orbán Orsolya
As of August 1, shoppers will have to dig deeper into their pockets – partly due to a 2–12% increase in the value-added tax (VAT), and partly due to the rise in excise duties. These hikes come on top of the price increases already triggered by the removal of the electricity price cap. Moreover, indirectly, the rising fuel prices will also drive already high prices even higher in the short term, so further increases are expected in September.
2025. augusztus 04., 17:302025. augusztus 04., 17:30
On Friday, August 1, the first deficit-reduction package from the Ilie Bolojan-led government was enacted. The final version of the austerity measures were published in the Monitorul Oficial (official gazette), and include a key fiscal measure: raising the general VAT rate from 19% to 21%. This 2% increase affects all goods and services currently subject to the 19% VAT rate, meaning at least a 2% price hike for categories like clothing, footwear, home appliances, etc.
At the same time, the 5% and 9% reduced VAT rates have been eliminated and replaced with a 11% rate – except for the case of real estate purchases, where the VAT has jumped from 9% to 21%.
a home that cost a net 100,000 euros in July, priced at 109,000 euros including VAT, will now cost 121,000 euros – an increase of 12,000 euros. The VAT increase from 5% to 11% will also affect textbooks, books, newspapers, magazines, entry fees to castles, museums, memorial houses, historical monuments, architectural and archaeological sites, zoos and botanical gardens, firewood, and heating energy provided to certain consumers during the cold season.
In the case of food, the VAT increase from 9% to 11% means a 0.44 lei price increase for a kilogram of meat (currently 22 lei) and a 0.16 lei increase for 1 kg of rice priced at 8 lei. The VAT on medicines, utilities (energy, water, sewage) has also gone up from 9% to 11%. Thus, a box of medicine that was 100 lei is now 102 lei and a 50-lei medicine costs 1 lei more. A water bill that was 200 lei has gone up by 4 lei since the start of August.
Some Retailers to Absorb VAT Increase – For Now
By Thursday noon, two retail chains announced that they will absorb the VAT hike for certain products, keeping prices at current levels. One of them is the German supermarket chain Lidl, which said on Wednesday it will maintain prices for basic food items, drinking water, pharmaceutical products, educational materials, and other essential goods. Similarly, Belgian retailer Mega Image is offering a 2% cashback offer throughout August, effectively offsetting the VAT increase.
On August 1, excise duties on alcohol, tobacco, and fuel went up – so cigarettes and alcoholic beverages are getting more expensive. The 10% increase in excise tax means gasoline prices will rise by 0.43 lei/liter while diesel prices will go up by 0.40 lei/liter.
As usual, companies are likely to pass increased transport costs on to consumers to some extent, meaning the already price-hiked goods and services will become even more expensive. This is happening just as the first post-subsidy electricity bills are arriving in August, which are also expected to reflect higher production costs.
Advance in price in Romania
Fotó: Orbán Orsolya
„With fuel prices increasing, we’ll likely see price hikes throughout the entire economy, especially since these increases follow surging energy bills for businesses,” said economic analyst Adrian Negrescu to Adevărul.ro. He estimates that price increases for most products will not exceed 10–15%, as companies must remain mindful of consumers’ reduced purchasing power that has emerged over the past two years.
And the price hikes won’t stop there: as of September 1, drivers will have to pay more for road toll stickers (rovinieta), and fines for failing to purchase them will also increase. Romania’s national company for road infrastructure administration (Compania Națională de Administrare a Infrastructurii Rutiere) announced that the annual road toll will rise from 28 to 50 euros, and fines will double.
„As of September 1, 2025, Law 2025/41 takes effect, bringing the following changes to road usage fees: the annual road toll increases from 28 to 50 euros (including VAT), and the fine for not having a valid sticker will double from 250–500 lei to 500–1000 lei,” reads the CNAIR statement. The law’s initiators say the aim is to align fees with EU standards and ensure funding for road infrastructure maintenance. Meanwhile, mandatory auto liability insurance is also expected to get more expensive, as on July 1 the government lifted the price cap that had been in effect since February 2023.
Shrinking Pensions
Many people’s wallets will get lighter not just because of higher prices. One key provision of the new deficit-reduction law is that pensioners receiving more than 3,000 lei per month must now pay health insurance contributions on the portion exceeding that threshold. So if someone receives a 4,000 lei pension, they will now pay a 10% contribution (100 lei) on the 1,000 lei that surpasses the limit. Another blow to pensioners is the freeze on pension increases – similar to the freeze on public-sector wages – until at least January 1, 2027.
These austerity measures became unavoidable after the budget deficit ballooned following a wave of campaign giveaways during Romania’s drawn-out „super-election year” (including the invalidation of the presidential election). At the end of last year, the budget deficit reached 9.4% of GDP – one of the highest in the EU. The Ciolacu government, formed after the December 2024 parliamentary elections, knew that deficit reduction was necessary to avoid financing the shortages with exorbitant interest rates like junk-rated countries – or risking Brussels cutting off EU funds.
Initially, they tried to „put out fires” with a so-called „omnibus ordinance” and pledged that in 2025 they would adopt concrete measures to cut spending and boost revenues. This year’s state budget projected a reduction of the deficit to 7.05% by the end of 2025. However, even the most optimistic forecasts now suggest the deficit may only shrink to around 8% – despite the deficit-reduction packages already adopted and those still in planning.
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