Soaring electricity prices in Romania, without any cap, increased by 61%, causing inflation to climb in July.
Romania, a European Union member state, has recently experienced a significant inflationary surge due to the removal of its electricity price cap and a VAT increase. This change, which took effect on July 1, 2025, has led to an average increase of 61.5% in electricity bills compared to June 2025 and 63% compared to July 2024.
The electricity price cap, in place for three years, had kept electricity costs about three times lower than the European average. Its removal, as a response to a formal notice from the European Commission, caused a significant price adjustment upward.
The removal of the cap also coincided with a VAT increase from 19% to 21% in August 2025, which further amplified inflationary pressures. As a result, the inflation rate in Romania increased by 2.7% in July alone, pushing the annual inflation rate to 7.8% from 5.7% in June.
The inflationary spike is considered transitory. The National Bank of Romania expects inflation to gradually decline after Q3 2025 and make a marked drop by Q3 2026 as the direct impact of removing the electricity price caps and VAT hikes fade away. This outlook depends on fiscal consolidation and structural reforms, including energy transition efforts supported by EU funds.
The inflationary surge has affected various sectors, with food and non-food goods, including energy, gas, and fuels, continuing to rise. In July 2025, Romania reported the third-highest electricity spot price in the EU, EUR 103.53/MWh (or RON 525 /MWh). This places Romania's electricity market pricing more closely in line with broader European trends after the cap's removal.
Last week, Romania's central bank announced it has maintained the monetary policy rate at 6.5% due to the already higher-than-expected inflation in June and the expected price shock prompted by the electricity price increase in July. Despite this, gas bills, where prices remain capped until March 2026, also rose by +3% last month, but are still below the level of a year ago.
In summary, the removal of the electricity price cap and the VAT increase have contributed to a temporary inflationary surge in Romania. However, the National Bank of Romania expects inflation to normalize within about a year, provided that fiscal consolidation and structural reforms are implemented effectively.
- The electricity market pricing in Romania, following the removal of the cap, has now become more aligned with broader European trends in the energy sector.
- The transitory inflationary spike in Romania has affected various sectors, including finance, as evidenced by the rise in gas bills, despite their capped prices continuing in the market.
