The retail sales volume index in Romania recovered for the second consecutive month in October, when it increased by 0.9% m/m after the 1.3% m/m advance in September – but it was far from fully recovering the 4.0% m/m plunge seen in August as an effect of higher VAT rate enforcement amid already negative consumer sentiment generated by shrinking (-4.2% y/y) real wages and high inflation. 

In annual terms, the retail sales dropped by 4.7% y/y in October – the steepest decline since the coronavirus crisis. 

Food sales plunged steeper than the average, by 6.9% y/y, while non-food sales demonstrated more resilience (-3.3% y/y), supporting the idea of regressive impact of the budgetary measures enforced by the government: the lower income households were hit the most, while the more affluent ones are still comparatively better off. The car fuel sales declined by 3.9% y/y.

The retail sales index has gradually lost momentum during 2025, still posting a significant 3.5% y/y advance but already fading to +1.9% y/y in Q2 before entering the negative territory (-0.2% y/y) in Q3. Comparatively, the retail sales surged by 8.6% y/y in 2024 during an electoral year when the government increased pensions and the minimum wage significantly while maintaining energy price subsidies and a price-capping mechanism for basic food goods. 

The private consumption, a significant contributor to domestic demand and hence to the economic growth in 2024, failed to play this role in 2025 and is unlikely to recover significantly in 2026 amid a slow nominal advance in households’ incomes expected during the next year. 

The wages in the budgetary sector will not increase during 2026 after staying constant during 2025, and the public pensions will not be indexed to inflation in January 2026. Furthermore, the government plans to keep the minimum wage constant during 2026 as well. 

Despite expected subdued inflation over the coming quarters, this will severely affect private consumption, with a visible impact on overall economic growth. The executive expects strong investments financed by the EU budget and EU-guaranteed loans to prop up the growth rate next year above the sluggish rate, not expected to exceed 1% in 2025 by much.

iulian@romania-insider.com

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