Wage development in Romania decelerates, recording a yearly increase of 1.3% in June
Romania's real net wage growth has shown a mixed picture for the second half of 2022 and beyond, as sectors experience varying levels of growth, all while grappling with high inflation and economic pressures.
The manufacturing sector, for instance, has seen a notable advancement, with wages posting an average real increase of +5.0% year-on-year. This growth is particularly evident in the production of other transport means, which experienced a significant +12.7% year-on-year wage increase. However, this growth is sensitive to inflation and external economic factors affecting costs and competitiveness.
On the other hand, sectors such as education, health care, and public administration are projected to continue growing, but the impact of inflation and budgetary constraints may limit the real wage gains. The construction sector, facing rising costs due to increasing construction materials and land prices, may see limited real gains despite demand in the sector.
The IT&C sector, however, is an exception, with wage growth tending to be stronger and more resilient, supported by ongoing digital transformation and demand for skilled labor.
The annual growth rate of the average net wage in June 2022 was 7.0% year-on-year, but in real terms, it was only 1.3% year-on-year, marking the slowest growth since November 2021. This modest real wage growth is a reflection of the persistent inflationary pressures, with Romania's inflation peaking at about 85.5% in October 2022 and still measuring at 38.1% by early 2025.
The high inflation environment has significantly impacted real net wages across all sectors. While nominal wages may rise in some sectors, the erosion of purchasing power, especially in those sectors constrained by public budgets or exposure to rising material and energy costs, is a concern. IT&C is an exception where wages are more likely to grow faster due to market demand.
The outlook for the second half of 2022 and beyond suggests that nominal wage increases will continue, but real net wage growth remains modest or negative in some sectors. Sectors dominated by the budgetary sector, such as education, health care, and public administration, have posted negative dynamics, with -4.7%, -3.2%, and -3.2% year-on-year declines in wages, respectively.
The negative growth rates of real net wages in certain sectors may keep the overall real growth rate in the negative territory for at least the second half of 2022. The impact on consumer confidence and budgets due to the negative growth rates of real net wages may affect private consumption and economic growth.
In the construction and IT&C sectors, wages have decreased by 2.8% and 5.9% year-on-year, respectively, due to the elimination of fiscal allowances this year. The consumer price hikes in July and August 2022 will result in negative growth rates of the real net wages for the first time since the 2022 inflationary shock.
| Sector | Expected Real Net Wage Growth Trend (post-H2 2022) | |---------------------|------------------------------------------------------------------------| | Education | Moderate growth; inflation dampens real wage gains | | Health Care | Moderate growth; constrained by budgets, inflation impact | | Public Administration| Moderate growth; public sector constraints limit increases | | Construction | Limited real gains due to rising input costs despite demand | | IT&C | Stronger wage growth driven by demand for tech skills | | Manufacturing | Moderate growth; sensitive to inflation and external economic factors |
The average net wage in Romania was RON 5,539 (EUR 1,097) in June 2022. Despite the modest real wage growth, the average net wage increased by a real 2.4% year-on-year in the entire second quarter of 2022. Wages in the automobile production sector saw a +10.0% year-on-year increase, while the crude oil processing sector experienced a +12.9% year-on-year wage increase in manufacturing.
The overall outlook is that nominal wage increases will continue, but real net wage growth remains modest or negative in some sectors due to persistent inflationary pressures.
The financial impact of inflation and economic pressures on various sectors, such as education, health care, public administration, and construction, may limit their real wage growth trend post-H2 2022. On the other hand, the IT&C sector, driven by market demand and ongoing digital transformation, is expected to exhibit stronger wage growth.
The banking and finance sector, playing a crucial role in the economy, must take these trends into account while making strategic decisions with regard to their business operations, investment, and lending practices, helping to mitigate the negative effects of inflation and fostering growth in various sectors, including the IT&C industry.
