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Tuesday, August 5, 2008

Romania Wages Accelerate To An Annual 24.4% In June

Romanian annual wage growth, which prompted the central bank to raise the European Union's highest interest rates last week, accelerated to 24.4 percent in June as investment boosted demand for workers. Net monthly wages rose to 1,273 lei ($564) in June, the Bucharest-based National Statistics Institute said in an e-mail today. Growth accelerated from an annual 23.3 percent in May, while wages rose a monthly 2 percent.

Central bank Governor Mugur Isarescu said yesterday that wages are rising too fast, helping boost the inflation rate above 9.1 percent in July and outstripping productivity gains, while the economy is ``obviously overheating.'' The central bank on July 31 raised its Monetary Policy Rate a seventh time to 10.25 percent.

Romania's entry to the EU last year set off labor migration to Italy, Spain and other bloc members, aggravating a labor shortage and further increasing wages. The remittances they send home on a monthly basis has also boosted demand for workers inside Romania.

Unemployment in June was 3.8 percent, the lowest rate in 16 years, the National Labor Agency said on July 10.

Higher paychecks are also helping spark a lending boom as Romanians exercise their increased borrowing power. At end-June 2008, total non-government credit was up year on year by 63.4 percent, or 50.5 percent in real terms, on the back of the 40.0 percent increase in RON-denominated loans (28.9 percent in real terms) and the 89.3 percent advance in foreign currency-denominated loans expressed in RON (when expressed in EUR, forex loans expanded by 62.7 percent).

Romania's construction industry, including commercial and engineering works, expanded an annual 34 percent in May, the fastest pace in the EU, the institute said on July 4.

The Romanian Association of Construction Companies has said builders, who employ 300,000 workers in the nation of 22 million, need another 300,000 workers just to stay on scheduled with current projects.

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