Crisis cancels retail growth in Romania; sales back to 2007 level, study finds

Romanian retail sales are expected to go back to the 2007 level, after decreasing by as much as 10.4 percent in 2009, according to a recent report by advisory firm Candole. The biggest decline was in June last year, when retail sales dropped by 16.4 percent. This came after two years of economic boom, 2007 and 2008, when retail sales grew by 20 percent year-on-year. The government’s austerity measures were a major contribution to poor sector performance, which is expected to further decline by 4.6 percent this year. Regionally, the biggest drop in retail sales was in Slovakia, with a decrease of 11.9 percent in 2009, followed by Romania. The forecast for this year shows Romania, Bulgaria and Hungary are the only countries in the region to post retail sales drop, with Bulgaria ranking first – 6 percent drop, and Romania coming second. The other countries included in the report – Poland, the Czech Republic, Slovakia are expected to see sales back on the plus side. “Romanians have sharply cut their spending on food and especially furnishings. Sales of fuel have collapsed, but this is because of the reduced transportation needs of the shrinking economy,” writes the Candole report. However, two segments performed rather well despite the crisis. “Unlike in other countries, retail sales in clothing never stopped growing in Romania. Online orders increased by double digit rates, fuelled by the competitive pricing of internet stores,” the report goes on. Consumers have a negative view, which Candole Research sees as an imminent threat to retail sales. Consumer confidence, which has been recovering modestly for the last six months, lost 20 percent of its value in May. “Households now see their financial situation in the next 12 months as more unfavorable. They find conditions for large purchases to be bleak. Although the majority of consumers expect lower unemployment in the next year, they are also convinced the worst of the financial crisis is not yet behind them,” according to Candole. Candole Research is the analytical arm of Candole Partners, economic and regulatory advisers focused on central and southeast Europe. Corina Saceanu