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Romanian Pvt Sector Wages To Drop In ’09, Hit Consumption – Analysts

The salaries of employees in the Romanian private sector will have a negative evolution this year, in real terms, which will fuel a significant decrease in consumption, analysts said, adding a drop in salaries, in nominal terms, is not out of the question.
Romanian Pvt Sector Wages To Drop In ’09, Hit Consumption – Analysts
05 feb. 2009, 19:49, English

In December 2008, salaries in the private sector grew by 13.2%, which indicates mny bonuses were paid at yearend, while the nominal salaries of employees in the public sector were reduced by a monthly rate of 1.3%, according to calculations by ING Bank economists.

The average salary gain registered a slower pace of growth in December 2008, namely 17.6%, compared to the 21.4% growth in November, despite the granting of bonuses and the thirteenth wage, according to data published Wednesday by the Romanian National Institute for Statistics.

"It is certain that in the private sector measures have already been taken to cut salaries, and even to reduce staff, in order to cut costs. (…) Salaries in the private sector will register an almost zero increase in nominal terms, and there will surely be a negative evolution in real terms,” Raiffeisen Bank Romania chief economist Ionut Dumitru told MEDIAFAX.

"Throughout the year there will be an increase in salaries, in nominal terms, given that salaries are in ratio with the inflation in the public sector, but this growth will be below 10%, probably around 5-6%. In real terms, salaries will grow by an average nearing 0%, and they might even decrease," Dumitru anticipates.

He added the evolution of salaries will have an impact on consumption this year, which will slow down to 2-3%.

ING Bank analysts anticipate the real growth of the average salary could become negative in the weeks to come and there might even be a decrease in the nominal salary, given the gloomy outlook on the deterioration of economic conditions.

The ING analyst outlooks, for the increase of salaries in nominal terms, remain pessimistic, as companies are trying to keep having positive results in an environment of poor demand, and some of the large companies already seem to plan 20% salary cuts.

The same analysts anticipate spending will be seriously diminished, based on the sudden drop in lending this year, which will have a negative influence on consumer oriented activities.