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Competition Council: Food price increase could be caused by demand excess from budget deficit

de Razvan Diaconu , 27.11.2017

The Competition Council started an analysis, following the request of the Ministry of Agriculture, to establish the causes of the accelerated food price increase this month.

One of the possible reasons is the increase in the budget deficit, which leads to an increase in imports and puts pressure on inflation, Bogdan Chiritoiu (foto), president of this institution, told Agerpres on Tuesday.

The Competition Council’s analysis comes after the Agriculture Minister Petre Daea voiced his perplexity on Friday that prices of some food products, especially the eggs, meat and dairy products, have increased lately even though the ministry’s analyses have not shown any objective reasons for price increases. “We ask for the Competition Council’s support to see if there are elements of any agreement between traders, as we cannot explain otherwise,” Petre Daea announced.

We received a request from the Ministry of Agriculture to analyse the food prices, especially for butter, eggs and some meat products, where prices had radical evolutions. It is a good thing they send us such a notification, but it would be good to come up with data, more information. We also asked for that because the line ministry has more information on this issue,” Bogdan Chiritoiu said on Tuesday.

He explained that some price increases seem to be regional in nature, such as the price of eggs and butter, but this would not fully explain the increases in Romania.

At the same time, when asked if he also suspects, the same as Petre Daea, an agreement between retailers, Bogdan Chiritoiu replied: “I could not say this now, it is too early. We will analyse the whole chain, from production to the shelf, to see if we are dealing with a functioning market mechanism.”

According to Bogdan Chiritoiu, things might be much simpler in reality: the price increases could be the effect of the increase in the budget deficit. “The demand excess from the budget deficit transfers to imports and the trade deficit increases. So, if we have a budget deficit, it attracts imports, which generates a decline in the exchange rate and inflation. Since most of the food products are imported and the Romanian leu declines against the euro, that generates price increases. These are rules of the economy,” Chiritoiu explained.

The President of the Competition Council could not offer a timeframe in which the analysis could be completed, expressing the hope that will be achieved as soon as possible.

He reminded the fine of EUR 35 million applied in 2015 to Metro, Real, Selgros, Mega Image and their suppliers following some anti-competitive agreements, and mentioned that there is another investigation that the Council analyses, on possible illegal behaviours of Cora, Carrefour, Kaufland and their suppliers, an investigation to be completed in the first part of next year.

On Friday, the Agriculture Minister Petre Daea said that recently “took a walk” in several markets and stores in Bucharest and found “some abnormalities and incomprehensible things”, as there were no increases in the production costs, but the price of food products doubled at the shelf in some cases.

Farmers also ask authorities to intervene, as they tell they sell their production at lower prices than a few weeks ago, but on the other hand, the products reach the consumer at much higher prices.

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