Accessibility links

Central Europe: Consumers' Purchasing Power Is Rising

  • Kitty McKinsey

Prague, 4 December 1997 (RFE/RL) -- On the same day this week that a mere 1,500 Prague residents rallied in Wenceslas Square to support their embattled prime minister, Vaclav Klaus, more than 25,000 others traveled to the city's Cerny Most district for the opening of the Czech Republic's largest shopping center.

The government has fallen, the Czech Crown may be in free fall, and the stock market has the jitters, but Czechs carry on shopping. In fact, Czech retailers are expecting record sales this Christmas season.

As Ales Benda, spokesman for major Prague supermarket Tesco puts it: "Czechs are spenders. Czechs are still good customers, despite all the economic problems."

The pre-Christmas spending spree in Prague underlines an increase in purchasing power among Eastern consumers that was recently detailed in a survey conducted by the Vienna-based publication, Business Eastern Europe.

The survey compared prices of various foods, goods and services -- and how long consumers have to work in various countries to afford them. A number of former Communist countries were compared against Austria, as a benchmark of a prosperous Western country. The statistics were collected at the beginning of October.

The man who conducted the survey, James Arnold, assistant editor of Business Eastern Europe, said he was "quite surprised by how close key countries in Eastern Europe are to Austria."

Slovenian purchasing power is two-thirds of that enjoyed in Austria, one of the wealthiest of the European Union countries.

The countries where consumer purchasing power is the strongest are Slovenia, Poland, Hungary, Croatia and the Czech Republic. The ex-Communist part of Europe divides fairly dramatically between prosperous countries that were once part of the Austro-Hungarian Empire, on the one hand, and on the other hand: the countries of the former Soviet Union, and the Balkans, such as Romania and Bulgaria, whose economy nearly collapsed earlier this year.

As Arnold puts it, "the gap between the richest and poorest remains yawning." An Austrian would have to save a month's pay to buy a motorbike in Vienna, and a Slovenian would have to save for six weeks to buy the same bike in Ljubljana. But a Ukrainian would have to save a whopping year-and-a-half's pay to afford the same bike in Kyiv. And Bulgarian consumers have to save 18 times as long as Austrians to buy a personal computer.

The sharp contrasts continue with more day-to-day purchases. Half a kilogram of ground coffee costs just 0.5 percent of the average monthly wage in Slovenia, but coffee is still a luxury item in Ukraine. There the same half kilo would cost more than five percent of a monthly wage.

Similarly, an Austrian can buy a woman's dress for only seven percent of an average monthly salary, but a Romanian would have to devote 10 times more to the purchase -- or almost 73 percent of a month's salary.

In all countries, there is an elite that can afford -- and demands -- premium consumer goods. Even in poor Romania, Italy's Benetton clothing store recently opened a "mega-store" in Bucharest to cater to upscale customers.

In much richer Hungary, the statistical office reports that real wages increased more than seven percent in the first quarter of this year compared with the same period last year. Retailers report that rich Hungarians have already bought what are half-jokingly called "necessary luxuries" -- television sets, refrigerators and stereos. Now they are on the lookout for electric razors, dishwashers and portable CD players.

Closely connected with increased purchasing power is a boom -- at least in the Central European countries of Poland, the Czech Republic and Hungary -- in plastic cards, both debit and credit cards. Last year, the number of plastic cards in circulation in Hungary soared an amazing 800 percent. In the Czech Republic and Poland the number of plastic cards in circulation has risen by 290 percent over the last four years. In a part of the world where cash was king for so many decades, consumers are increasingly getting used to paying for purchases with a card instead.