Page 11 - bne_newspaper_November_09_2018

bne Chart
November 9, 2018 www.intellinews.com I Page 11
Grim outlook as Romania’s retail sales growth hits 5-year low
Iulian Ernst in Bucharest
Romania’s retail sales index increased by 3.0% y/y at comparable prices in Q3, according to bne IntelliNews calculations based on data released by the statistics office. It was the weakest performance in five years and the outlook remains grim amid the economic slowdown, rising interest rates and lack of room for further fiscal stimulus.
Romania’s retail sales had soared over the past year due to the combination of rising wages and VAT rate cuts. The government significantly increased wages in the public sector, while
the higher minimum statutory wage prompted a similar move in the private sector with the outcome of a robust advance of households’ in- comes. The low interest rates until last autumn contributed to consumer exuberance as well.
However, consumer confidence has gradually weakened and the government managed to maintain the pace of private consumption (and
thus GDP growth) at the cost of even more wage hikes. This narrowed the executive’s room of manoeuvre as it now has to address the resultant fiscal slippage.
The January-September budget deficit doubled in y/y terms to hit 1.8% of GDP, but the worst is still to come in Q4 due to the seasonal pattern. The gap is likely to exceed 3.5% of GDP if the usual pattern is observed. Indeed, the military spending this year contributed to the budget gap on top of the expansionary fiscal policy. But this will not reverse in 2019, when even more contracts for missiles, armoured vehicles and multi-role frigates are going to be signed.
Notably, the non-food sales index, seasonally adjusted, decreased by 2.0% ytd as of September. The index, which best reflects households’ propensity for consumption, is at the same level as it was some seven quarters earlier at the end of 2016.