The net average wage in Romania rose by 12.1% YoY to RON 3,975 (EUR 805) in July, lagging behind the 15% headline inflation, according to the statistics office INS.

In real terms, the average net wage contracted by 2.5% YoY - not far from the 2.4% YoY decline seen in June.

The households’ budgets are visibly shrinking in real terms. There is, however, a visible discrepancy between the 36%-37% YoY jump in the net wages paid in the sectors of agriculture and food processing (driven by regulations enforced by the Government) and the 4% YoY increase in the sectors of education and healthcare.

Overall, the 12.1% nominal advance of the net wages, combined with a stable exchange rate, resulted in a 12% YoY advance of the average net salary expressed in euros.

Thus, the net wages expressed in euros rose faster than the headline inflation in the euro area (8.9%% YoY in July) and resulted in a real expansion of the Romanian households’ budgets discounted for the consumer prices in Europe. For instance, the food prices rose by 9.8% YoY in the euro area - roughly half the 18% YoY advance of the food prices in Romania.

The implications of such developments are twofold. Firstly, the industries with the slower advance of the net wages are facing a particularly high impact of inflation. Secondly, the steady exchange rate encourages imports, particularly in the sector of food goods (where domestic prices surged significantly). 

iulian@romania-insider.com

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