It has been on the agenda for years Romania in terms of some of its economic data, it is increasingly approaching, in some cases catching up, or even ahead of Hungary. Of course, it is sometimes difficult to navigate between the data, as they are not completely comparable.
Such is the gross salary, which in Romania includes all the burdens placed on the salary, while in Hungary the employer pays a social contribution tax of 13 percent on top of the gross salary, so we actually get a comparable amount by adding 13 percent.
A very comparable figure
However, the net average salary is excellently comparable, if only because it is the amount that can actually be spent. The Romanian statistical institute publishes the data every month with the same care as the KSH. Until now, the Romanian net average salary has always lagged behind the domestic average salary, albeit at a gradually decreasing rate. Now, however, a sudden change has occurred due to the sharp weakening of the forint: the Hungarian average wage in euros has fallen, and has roughly reached the same level as the Romanian one.
The Romanian data according to the average net salary in September was 5,228 lei, which is 1,050 euros considering the 4.977 euro/lei exchange rate. The latest report of the KSH according to the Hungarian net average wage in August, including discounts, was HUF 433,000, which is EUR 1,060 at the current EUR exchange rate of HUF 408.
Exchange rate effect
There is thus a slight difference between the two data, which can change from day to day depending on the exchange rate of the forint, while the lei is much more stable: its exchange rate has been almost unchanged for the past year (presumably the Romanian central bank has unofficially stabilized the exchange rate, in market conditions there are certainly larger fluctuations than this are).
Unfortunately, the HUF recently broke through the level of 400 per euroa very important support level from the forint’s point of view fell over a month and a half ago.
Romanian lei/forint, 10 years
Image: stooq.com
Of course, the exchange rate can change in both directions in the future, but we can always calculate with the current level, especially if it is not the result of a sudden movement that would distort the data. The fact that the two wage figures are so close to each other is happening for the first time, and now it is clearly due to the trend-like weakening of the forint this year.
It is also clear from this that the years-long depreciation of the forint has a very unfavorable effect on the domestic catch-up rate, because the decrease in the figure in euros has increased the difference to the detriment of the Hungarian wage level, not only compared to the developed countries of Western Europe, but also compared to the wages of the surrounding catch-up countries the backlog also increased.
They started from scratch
The comparison with the Romanian data is spectacular because at the time of the regime change there was an almost incomparable difference between the economic situation of the two countries. During Ceausescu’s reign of terror, Romania was completely looted, and at the time of the regime change, it was a starving and freezing country, where the economy essentially had to start from zero.
It is no coincidence that the majority of Hungarians moved to Hungary, strongly curbing the decline of the domestic population, and Romanians went en masse to Italy and Spain, even though they still needed a work permit at the time, the free flow of labor was realized only during the EU membership.
The development started after a few years, but at the turn of the millennium, the Hungarian net average wage, which was barely more than 200 euros, was still double the Romanian figure. The two-fold difference began to decrease after 2005, which in itself is a natural process, because if the wage level between two countries is that much lower, then working capital investors often choose the country with much lower wage costs, so with such a difference, the equalization process is partly legal.
Catching up
In 2010, the Romanian average wage was already roughly 70 percent of the Hungarian wage, but the difference slowed down from there, and even stagnated for years. However, in recent years, especially since the forint has been weakening compared to the lei, the process has gained momentum, and the difference has been decreasing.
Two years ago, when the forint collapsed during the energy crisis, the figures were already close to each other, but during the consolidation of the forint exchange rate last year, there was a roughly 10 percent difference. This has now decreased to less than one percent, largely due to the weakening of the forint.
What to expect?
The exciting question is whether this will remain the case permanently. The most important factor in the short term is the exchange rate: if the forint continues to weaken, there is no chance of the trend changing, the process will inflate part of the Hungarian wage increase in euros (and currently also in lei).
In addition, the level of the percentage wage increase within the two countries is decisive: if the nominal wage increase of 10 percent or higher persists in our country, then the level will probably be the same.
In the short term, it is also important when a significant part of the wage increase will take place within a year. It would be logical that there is usually the biggest jump in January, when the minimum wage is raised, but in practice there are usually significant deviations from this, for example due to one-off benefits on top of the salary at the end of the year (turkey money) or similar factors. Thus, it may happen that in the next period, the data of the two countries will precede each other several times.
Source: www.economx.hu
