Romanian Retail Sales Fall 8.6% From Year Earlier on Higher VAT, Wage Cuts

Romanian retail sales declined in July as an increase in the value-added tax and a reduction in public wages stifled domestic demand.

Sales dropped an annual 8.6 percent, after a 3.2 percent increase in June, the Bucharest-based National Statistics Institute said today in an e-mailed statement. Sales fell 10.5 percent from the previous month.

The economy will contract as much as 1.9 percent this year as austerity measures choke demand, according to forecasts from the International Monetary Fund. The government increased VAT by 5 percentage points to 24 percent and cut public-employee pay by 25 percent from July to meet conditions for a 20 billion-euro ($26 billion) IMF-led loan program.

Sales of food, drink and tobacco fell an annual 8.3 percent in July, compared with a 1.1 percent decline in June, the institute said. Non-food sales declined 9.4 percent.

To contact the reporter on this story: Irina Savu in Bucharest at isavu@bloomberg.net.

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