IRSOP: The population’s pessimistic economic expectations, low consumption to temper inflation, but not favoring the economy’s growth

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Romanians are braking the consumption, says a recent IRSOP survey conducted during January 18-18, 2021. Only 31% of them spent more last year as against previous years, 47% of them spent the same and 22% spent less.

In 2021, 41% of the respondents believe will spend more, 38% the same as last year and 19% less.

In terms of spending, people consider both necessary expenditure and also the discretionary expenditure that we all do after paying the current obligations.

55 percent of the respondents believe that their necessary or daily expenditure will be higher in 2021, 33% expect them to be same and only 10% think they will be less.

Romanians spent 42% last year on purchasing a long-standing item for the house, while 32% plan to do the same this year.

32% oft he respondents spent money on house repairing, revamping in 2020, and 33% plan to do it in 2021.

27% of the Romanians spent money for vacations in Romania last year, with 37% planning to do so this year. 17% spent on vacations abroad last year, with 19% intending to do it this year.
11% bought a new or second-hand car last year, with only 8% wanting to do so in 2021. 6% contracted a bank loan in 2020, with 4% eyeing such a thing this year.

In terms of intention to buy a house, 3% did that last year, yet more to purchase a dwelling this year – 9%.

Only 1% started a business last year, but 5% would do it in 2021.

“The economists think that  the households have money left after the restrictions last year, and as these restrictions are lifted, an avalanche of expenses will follow that might refuel the inflation. However, our statistics do not confirm this hypothesis,” say the authors of the study.

IRSOP argues that the consumption might be higher if people had more money available. When incomes increase they buy more goods and services and higher quantities out of they are usually buying. Only that most of the Romanians do not expect higher incomes in 2021: 54% of them say their revenues will be the same as last year, 17% say they will be lower, and 27% think they will be higher.

According to the survey’s authors, prices matter in forecasting the future expenses. If prices remain the same, people will afford to buy more without giving up other alternatives. Yet, the population does not consider that prices will be stable. Almost two thirds (63%) expect higher prices, while 30% anticipate a more appeased price hike.

When incertitude persists, and people expect stagnation or deterioration of life their response will be to cut the discretionary expenditure and to make backup savings. Despite the medical crisis, 30% of respondents say that they had managed to save money last year, while in 2021 almost half (46%) say they intend to save money.

So, the survey data suggest that, for most of Romanians, the improvement of life seems to remain a dream. More than two thirds (69%) think that the welfare is declining, while 21% expect a stable standard of living at the most.

“The future is influencing the present. The people’s current expenditure takes into the account the perspective of the future. If the forecasts on prices, incomes and welfare are pessimistic people are diminishing the investments and expenses at all levels and are trying to save more. The good news is that the danger of inflation is also down. The less good news is that the economy as a whole starts suffering of lack of demand”, the authors of the survey underlined.

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