GfK: Romania posted the greatest gain in purchasing power in EU last year, but from low base

Aurel Dragan 24/05/2018 | 16:03

The purchasing power of Romanians increased by 7.8 percent in 2017, the highest growth rate among the European Union member states, but remains low compared with more advanced countries, with EUR 4,556 per inhabitant, acording to a study released on Thursday by GfK.

GfK’s indicator for purchasing power corresponds to the population’s disposable net income, including government subsidies such as pension payments, unemployment assistance and child benefit.

The population uses its purchasing power to cover expenses related to food, accommodation, services, vacations, insurance, private pension plans and retail purchases.

Purchasing power is a prognosis and is provided in nominal euro values. The indicator is entirely different from the ones like GDB per-capita at PPP (purchasing power parity), where Romania is at USD 24,000 according to CIA Factbook (and Poland for example is at USD 29,300, both 2017 estimates).

EU average of nominal purchasing power increased cu 1.9 percent in 2017 and the average was at EUR 16,436. Only Great Britain managed to end the year in the negative side with -1.5 percent, which is partly a result of the devaluation of the British pound.

The disparities between countries are huge and the numbers are different from the GDP related ones. For example, Poland has a purchase power per-capita of EUR 12,473, higher than Spain’s Andalusian region, where is at EUR 10,985. This is the case even though Spain’s average per-capita purchasing power is more than twice as high as Poland’s.

GfK study includes 32 European countries, including regions like Switzerland, Norway, Ukraine and Turkey.

Even if rising, the purchasing power in Romania is among the lowest in Europe. The situation is similar to Ukraine, Bulgaria, Serbia, Bosnia-Herzegovina, Macedonia and, in part, Turkey. The regions of the country where purchasing power is higher than the rest of the country are: Bucharest and the counties of Cluj, Timis, Alba, Sibiu, Brasov, Prahova, Arges, Constanta.

Retail sales forecast for 2018

EU countries had a retail turnover increase of + 1.8 percent in 2017. Due to the effects of the exchange rate, the UK suffered a turnover decrease of -4.2 percent in euros. The Czech Republic (+ 9.8 percent) and Romania (+ 9.3 percent) are among the champions, with almost two-digit growth rates and moderate inflation. Thanks to continued revenue growth, Eastern European countries in the previous years led the platoon again in 2018.

GfK expects robust growth rates in 2018 for Romania (+ 7.5 percent), Estonia (+6, 8 percent), Czech Republic (+ 6.5 percent), Bulgaria (+ 5.3 percent) and Hungary (+ 6 percent). GfK estimates a 2.1 percent increase in retail business in 2018, slightly slowing over the previous year.

The population expenditure in retail of total expenditures puts Romania close to the European average. The share of population spending in retail varies strongly across Europe: from just a quarter to almost 50 percent. The EU average was 30.5 percent in 2017. Romania’s share was 31.6 percent.

GfK anticipates a turnover increase in 2018, + 2.1 percent, for retail in EU countries. But the situation for each country varies. While the increase in value is expected for countries such as France, Spain and Hungary, the situation for countries with low growth rates will be less favorable due to rising inflation.

The European economy is facing major changes due to Brexit, in addition to various economic and political challenges. Uncertainty about future trade conditions with the US raises concerns about the potential impact on European exports. As in previous years, GfK’s geomarketing solutions explore the current situation and anticipates the upcoming one for the retail market in Europe.

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