The introduction of a sin tax in Romania may turn inflation targets upside down taking into account the high importance cigarettes have in the Romanian consumer spending, Romanian Central Bank (BNR) governor Mugur Isarescu warned on Wednesday.
"Personally I am worried about the introduction of a sin tax taking into account that cigarettes cover 4% of people’s average spending, almost double the percent of bread. One may joke that it seems like Romanians are eating cigarettes", Mugur Isarescu said.
While mentioning other factors influencing the economy, such as higher natural gas prices, he said BNR expected the Romanian inflation to follow "a flatter curve" in the coming period.
According to economic analyst Constantin Rudnitchi, the introduction of a sin tax would be a simplistic and artificial way to bring money to the state budget. Chances that inflation targets for 2006 be missed are of no surprise for anybody, Rudnitchi says.
According to Isarescu, there is no connection about the new banknote announced this week and the inflationary process. He said he had full confidence the appreciation of the national currency will support deflation and would help the passage to the European single currency.