Revolut, a global financial super app used by over 25 million customers worldwide, asked 6,000 people in 6 countries about the impact of inflation and high prices on their financial plans in 2023. 1,000 people answered the questions in Romania.
After 10 months of double-digit inflation, have Romanians come to terms with increasing prices? Do they cut expenses or ask for a pay raise? How do they protect their savings?
What will 2023 be like
The National Bank of Romania’s long-term goal is to maintain inflation at the level of 2.50 % with a deviation range of +/-1 percentage point. It is called the inflation target. Last year, inflation broke through the 3.50% threshold. Prices grew in single digits and then in double digits y/y. The record was set in November 2022 (16.8% y.o.y.) and year-end readings were slightly lower. So what will 2023 bring? 70% of respondents in Romania believe that inflation and prices will continue to rise. 19% believe that prices will remain at the current level in the new year. 8% of respondents believe that in 2023 the prices will fall. This rare positive view is shared more often by men (12%), people aged 25-34 (11%), and Center region residents (12%). Increases in prices and inflation are expected more often by women (75%) and young people aged 45-54 (78%). Will inflation surprise us all?
Who is hit by inflation
The survey question asked which households were most affected by inflation and high prices. According to the respondents, working parents with children (77%) and pensioners (71%) have the highest exposure to inflation. Every third person surveyed pointed to the difficult life of micro-entrepreneurs as well (33%). Who is spared by inflation? According to people surveyed, life is easier for single people (working people living alone) – 6% and for couples living together (18%). However, the point of view depends on age. Young people aged 18-24 are more likely to think that inflation hits students hard (45%), and also people aged 65+ think of themselves as being more exposed (94%).
From the employee’s point of view, the simplest recipe for inflation is an increase in wages. In fact, 45% of the surveyed Romanians admitted (40% women, 49% men) that they had received pay raise – matching inflation (6%), above inflation (4%), or below inflation (34%). Also 4 Romanians out of 10 indicated that the pay raise missed them. Though, 15% hope for a raise in 2023 and 10% still intend to negotiate it. 19% admitted that they have not received a pay raise and it is unlikely to happen. 3% of Romanians, whose salary was reduced last year, despite inflation, have the hardest time. The highest proportion of employees getting a wage increase above the inflation was registered among the 18-44 y.o. segment (7%) and in the center of Romania (6%). The South Eastern (Oltenia) respondents received a higher salary increase (42%), but below the inflation rate. The pensioners have also seen an improvement of their financial income, but lower to the inflation level (57%). What then? When there is no chance for a pay raise, you need to cut costs and change habits. Budgeting and spending control functions can help (e.g. in the Revolut app).
New financial habits
Changing lifestyle can be difficult, but 40% of Romanians surveyed admitted that inflation has taught them how to spend less and control expenses better. Under the influence of inflation, one in three Romanian respondents decided to save more for difficult times, and 13% plan to make more investments for the future. Only 4% would consider a side hustle job, and 27% prefer to pay for experiences instead of buying items. Only 8% of respondents believe that inflation will not affect their financial habits in the long term and nothing will change. Interestingly, 11% of Romanians surveyed declare that they plan to support charities in 2023, and donate more than before (despite inflation). 6% want to support refugees from Ukraine in particular.
Efforts to earn more and to cut expenses are not enough. Inflation also “eats up” savings. Is it better to spend them fast or to protect them? What would Romanians do if €10,000 appeared in their wallet ? 19% of the respondents, would use it to repay liabilities (mortgage installments, bills). 12% would use such an amount for large expenses (buying a car, renovating a flat). 10% would spend on pleasure (e.g. traveling) or invest into their own business. 9% would deposit them into a savings account in RON, and some also considered investing in governmental bonds, stocks and ETFs (8%), or simply put the money aside in a current account and have easy access to the funds (8%). Revolut Saving Vaults created in-app could be one of the solutions to save the money and also have an instant and transparent access to the funds.