The real net wage in Romania plunged by 5% y/y in August, after it had contracted nominally for the second consecutive month (-2.4% m/m) and the headline inflation rate accelerated to 9.9% y/y from 5.7% y/y only two months earlier, according to the data published by the statistics office INS. In absolute terms, the net wage reached RON 5,387 (EUR 1,063).
The real wage correction thus undergoes the steepest correction since July 2010, when the wages in the public sector were slashed by 25% and the VAT rate was hiked from 19% to 24% to address the severe budget crisis. This time, the wages in the budgetary sector will be kept steady over two years, and the VAT rate rose from 19% to 21%. Some analysts expect a further VAT rate hike in 2026.
The public administration sector and the sectors dominated by budgetary employees (education, health care) saw the deepest decline in their real wages, some 9%-10%. However, while the salaries in education and healthcare are close to the average (+3% and -1%, respectively), the wages in local administration are still 28% above the economy-wide average.
There are, however, sectors where the employment conditions are even worse: the wages dropped by real 24% y/y and are 10% below average in water transportation industry (a correction after sharp improvement during the first stage of the war in Ukraine), in HoReCa the real wage dropped by 5.3% y/y and are 37% below the average amid weaker performance of the sector prompted by fewer wage vouchers extended in the budgetary sector, and in wood processing (excl. furniture) the wages dropped by 7.0% y/y and are 31% below the average.
The employment conditions are still favourable in several sectors such as air transportation (+16% wages, which are 131% above average), crude processing (+6.4% y/y higher wages, 116% above average) and automobile manufacturing (+7.9% real wages, which are 17% above average).
The wage correction in July-August comes after a significant increase in the wage growth seen over the past quarters. Gross wages to GDP ratio rose at a past decade’s high.
The aggregate gross wages in Romania as a share of total GDP have increased to 57% in Q1 this year, 3 percentage points up y/y and the highest ratio in the past decades, and 49% in Q2 (+2pp y/y), according to data published by the statistics office INS.
The ratio, reflecting the share of the GDP distributed to employees, features ample seasonality due to GDP’s seasonality – but the 4-quarter average filters out this effect, and it reached 47% – a level not seen since 2001. This is an effect of sticky wages and economic slowdown in the past quarters, and generates pressures for a smaller, if any, nominal increase in wages over the coming quarters.
iulian@romania-insider.com
(Photo source: Aaron Amat/Dreamstime.com)
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