Once buoyant Romanian wages show signs of fatigue

Once buoyant Romanian wages show signs of fatigue
Romania’s wages, once buoyant, show signs of fatigue
By bne IntelliNews June 14, 2021

Romania’s average net wages posted an impressive 11.9% annual advance (+8.4% year on year in real terms), to RON3,561 (or €724) in April but the outstanding performance is largely due to low base effects, while the wages will rise at a much more moderate pace this year compared to the pre-crisis period, the state statistics committee reported on June 11. 

The broader picture shows the wages halted in April and the growth will resume at a more moderate pace compared to the pre-crisis period.

Rising inflation and a weaker currency will predictably erode the nominal advance of the nominal wages in the private sector and the wages in the public sector were already frozen by the government as part of the fiscal consolidation framework. However, the relaxation across European countries will result in the evaporation of a part of the local workforce, putting upward pressures again on wages and labour costs.

Compared to April 2019, net wages increased in April by a real 7.8% (3.8% annualised terms), compared with an 8.6%, 24-month increase calculated as of March. Expressed in euros, the average net wages edged down from €726 in March to €724 in April.

The wages have visibly lost the impetus provided by the repeated hikes in the wages and bonuses in the private sector, but the convergence toward EU levels in the private sector is likely to continue.

It is notable to see the wages have increased immediately after the crisis, in the second half of last year and this has contributed to the overall recovery, and at the same time to the record external deficits in the trade with goods seen in the first quarter of 2021.

The state forecasting and strategy body CNSP projects a 2% real advance in net wages this year (from +4% in 2020 and +8.8% in 2019), with the real growth rate to gradually return toward 4% per annum in 2022-2024.