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.\u00a0In absolute terms, the net wage reached RON 5,387 (EUR 1,063).<\/p>\n
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.<\/p>\n
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.<\/p>\n
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.\u00a0<\/p>\n
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).<\/p>\n
The wage correction in July-August comes after a significant increase in the wage growth seen over the past quarters.\u00a0<\/strong>Gross wages to GDP ratio rose at a past decade\u2019s high.<\/p>\n 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.<\/p>\n The ratio, reflecting the share of the GDP distributed to employees, features ample seasonality due to GDP\u2019s seasonality \u2013 but the 4-quarter average filters out this effect, and it reached 47% \u2013 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.<\/p>\n