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Wednesday, June 4, 2008

Romania Wages and Salaries April 2008

Romanian net wage growth, which the central bank says is a main driver of inflation, accelerated in April due to growing labour shortages. The average monthly net wage increased 24.8 percent from a year earlier to 1,282 lei ($546), the Bucharest-based National Statistics Institute said today. Growth accelerated from an annual 17.7 percent in March. On the month, wages increased by 7.6 percent. In real terms wages are up 16.2% year on year, since inflation in April was running at 8.6%.

Romania's entry to the EU last year has sparked an increase in foreign investment in construction and manufacturing, raising demand for workers. Romania has had below replacement fertility for many years now, and in addition at least one million romanians (out of a labour force of about 12 million) are currently working abroad and sending home remittances (at least 500,000 are in Spain, and the same number are estimated to be in Italy. The World Bank estimated remittances to be running at 5.5% of GDP in 2007. In macro economic terms this is virtually equivalent to a 5.5% fiscal stimulus from the government, since the effect on domestic demand is effectively the same.

The central bank, which has raised interest rates at every meeting since October to 9.75 percent, the highest in the EU, has said wage growth threatens to further accelerate inflation, which was near a two-year high of 8.6 percent in April.

The jobless rate fell to 3.9 percent in April, from 5.2 percent when Romania joined the EU on Jan. 1 of last year. The Romanian Association of Construction Companies has said builders need another 300,000 workers just to stay on scheduled with current projects.

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