- 54% of Romanians state their current financial situation is weak;
- Almost 50% of consumers in Romania have experienced reduction in income and savings during the last period;
- Less than 33% have been able to reduce household spending;
- 60% have savings worth 4 months or less to handle a potential loss of job or income reduction.
The ongoing COVID-19 crisis has found Romanians in a fragile financial position, as over 50% of consumers state their current financial situation is at least somewhat weak, and only 20% expect it to improve in the near future, according to the Financial Pulse Survey conducted by the local McKinsey & Company office (available here; it will be extended with new perspectives over the next weeks).
The same survey reveals that almost half of consumers (43%) perceive the local economy as weak and 40% expect it to worsen in the next 3 months. Moreover, Romanians are not optimistic either regarding the duration of the economic downturn: their most significant part (30%) foresee a 1-2 years period, while 19% of them expect it to last up to 3 years.
Since the onset of the pandemic, almost half of consumers have experienced a reduction in their household income and savings, but less than a third of them have been able to reduce the household spending. Additionally, job security is at least somehow a concern for approximately 60% of consumers.
“Savings have almost evaporated for consumers concerned with their job security; their income also declined significantly. Household income is stable in net terms for the consumers with more secure jobs, but their capacity to save declined by 30%+ net. We see different spending / saving dynamics across various demographic groups and it is high time for financial institutions to understand them and address them accordingly when designing new products for the post-COVID <<new normal>>. For example, people who managed to cut their spending were either the ones with no university degree or earning more, highly determined by different drivers across the two categories”, says Alexandru Filip, Managing Partner at McKinsey & Company’s Bucharest Office and Leader of the firm’s Digital and Analytics Practice in Central Europe.
Whereas the negative impact of COVID crisis on employment outlook is in line with expectations, the worrying aspect is that despite several years of accelerated growth in purchasing power and the living standards, in case of a potential loss of job or income reduction, 71% of the Romanians reported they can rely on less than RON 25,000 in savings for their household.
This modest savings level has a significant impact both on short-and long-term. In current emergency cases, savings can cover, for 61% of the respondents, at most 4 months at current spending level. Moreover, on the long run, over 70% of the respondents have concerns about adequate income during retirement.
“Romanian consumers are expected to come out of the current crisis in a more fragile position, but also more mindful of long-term financial protection. It will be up to banks to use this moment to underscore their role as ”financial supporters”, promoting relevant products and terms, and encourage mid and long-term financial accumulation”, added Alexandru Filip.
The “Financial Pulse Survey” survey was conducted in Romania in June 2020 and included more than 500 respondents. Results have been adjusted so that figures reflect the overall Romanian population aged 18-80.