Purchasing power and cost of living unequal between Bucharest and other Romanian cities

The cost of living varies across the main Romanian cities and the capital Bucharest, found a recent study by AT Kearney. Out of the six cities included in the analysis, Iasi and Cluj are the province cities closest to Bucharest, the cost of living there being with just 2.8 percent and 5.7 percent respectively lower than in Bucharest, whereas cities like Zalau differentiate a lot more – up to 14 percent. Surprisingly, a high gap seems to exist also compared to Ploiesti, which is stands at around 12 percent below the capital. The purchasing power is highly unequal between Bucharest and other cities, leaving wide space for companies in the local market if not to take action and react to these gaps, at least to admit that different regions need to be approached differently and what consumers want or are willing to buy in Iasi may not be the same as in Cluj or Bucharest, according to AT Kearney. The differences between these costs of living lie upon the average consumption basket and the weights that the different components of this basket take. For instance, food seems to be having the biggest share of the average consumer’s total spend, with around 35% percent, while utilities occupy also a high share in this basket (17 percent). This shows that differences in prices of food for example between regions have a high impact on the final indexes. Although food in Zalau or Calarasi is on average more expensive than in Bucharest (by almost 7 percent), categories of the consumption basket like clothing, leisure and entertainment or even domestic supplies are cheaper, thus leading to a lower cost of living index, according to AT Kearney. The reason may be higher competition on food market in Bucharest due to significantly higher number of discounters and hypermarkets compared to Zalau or Calarasi. If in terms of cost of living things tend to be closer, the gaps between net medium wages are significantly higher between the cities analyzed by AT Kearney. The income in Bucharest is, on an average, with 30 up to 50 percent higher than in other cities. Cities where cost of living is lower normally tend to be having also lower average salaries. If Iasi, Cluj or Timisoara are 30 percent below the capital, cities like Zalau or Calarasi are at around half of the medium net salary in Bucharest. In case rent is included in the calculation of monthly costs, the difference between cost of living in Bucharest and all other cities may exceed 30 percent. editor@romania-insider.com