The disposable income in Romania will drop by around 10 percent this year and by a further 0.8 percentage points in 2011, while the income in the Eastern European region will grow, according to a recent Erste Group report. The workforce competitiveness will trigger a growth in revenues across the region between 1 and 2.5 percent, according to the report.

“Disposable income is to pick up about 1-2.5% y/y in real terms in the region next year (the exception is Romania), resuming the consumption growth roughly at the same rate,” according to Erste analysts.

The disposable income, which is of around 65 percent of the GDP on an average, has been recently affected by the increase in unemployment and by the drop in other revenues,” writes Erste in its report.

In Romania, where the government approved ambitious austerity measures (including a 5pp hike of VAT), the growth of disposable income in real terms will remain in red figures next year, due to increased inflation, according to Erste Group. “Unemployment is expected to rise in Romania, where the government has announced sizable cuts of expenditures, namely overall compensation of employees in the public sector (down by 25%),” the report further writes.

Read the entire report here. Special_Report-Resuscitation_of_consumption_in_CEE