Monday, January 12, 2009

Romanian net wages up 21.4 pct y/y in November

BUCHAREST, Jan 12 (Reuters) - Romania's average net wages rose 21.4 percent on the year in nominal terms in November to 1,361 lei ($429) and were up 2.6 percent from October, data from the National Statistics Board (INS) showed on Monday.

Fast wage growth is a worry for the central bank, which is struggling with inflation, fanned by voracious import-fed domestic consumption which has also bloated Romania's current account deficit.

The fear is the Romanian economy could be destabilised if global cash flows and foreign investment dry up and are no longer sufficient to plug the double-digit external gap.

The global financial crisis caught Romania unprepared, as one of the most vulnerable economies in the region in terms of financing risks.

High inflation means the country's central bank has a policy dilemma, obliging it to refrain from the regional trend of cutting interest rates, although many expect a significant economic slowdown this year.

New European Union member Romania has attracted hefty foreign direct investment in recent years, lured by cheap labour and a 16-percent flat tax on income and profits.

However, double-digit wage rises and a shortage of skilled labour is worrying some investors as more than one in 10 Romanians have left the country to seek better pay abroad.
Expectations have risen in recent months that the global cash
squeeze which has cut demand and hastened recession across much of the globe will hurt Romanian jobs this year.

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