Behind Romania's Longest Consumption Crisis: Economist Warns of Strong Impact on Private Sector

Romania is grappling with its most prolonged period of consumer spending contraction in recent years, marked by 10 consecutive months of declining retail sales compared to the previous year. This sustained downturn signals a significant reduction in household expenditures, driven by a confluence of factors including escalating prices, waning economic confidence, political instability, and tax hikes that have eroded purchasing power.

Economists express concern over the severe impact on the private sector, with the prolonged slump in consumption beginning to affect business activity and overall economic growth. Iulian Lolea, chief economist at the Concordia employers' organization, noted that the primary explanation for the decline is not just high prices but a deterioration of economic confidence. This caution among consumers is reflected in company performance and the economy's growth trajectory.

Recent data from the National Institute of Statistics reveals a 4.7% decrease in retail sales volume in May compared to May 2025, contributing to a 5.3% decline over the first five months of the year. Non-food items saw the sharpest drop, with sales falling nearly 8% from January to May, while food, beverage, and tobacco sales decreased by 3.7%, and fuel sales by 2.8%. The May figures were particularly influenced by a 5.5% drop in fuel sales amid rising pump prices.

Despite the negative annual trend, a slight increase of approximately 1.2-1.3% in retail sales from April to May suggests a potential slowdown in the rate of deterioration. However, the broader economic picture remains challenging. Romania's GDP contracted by 1.7% in the first quarter, the second-worst performance in the EU. Industrial production fell by 2%, and household consumption decreased by 3% in March. While inflation shows signs of tempering, it remains high at 10.4% annually in June, with services experiencing the most significant price increases.

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The private sector is strongly affected.