fbpx Modifica setari cookieuri


Finance Ministry announces payment incentives for budget obligations outstanding after the state of emergency announcement

The Ministry of Public Finance (MFP) proposes to regulate a simplified alternative procedure for granting a payment rescheduling of up to 12 months, for the… Mai mult

IMF improved its forecast for Romania: 4.8% decrease in 2020 and 4.6 % increase next year

Romania’s economy will contract by 4.8% of GDP this year, according to the revised forecast of the International Monetary Fund (IMF), a slightly more optimistic… Mai mult

Romania’s recovery – in WB Report: 2021 indicators compared to starting moment of Covid crisis

The data included in the autumn report of the World Bank “COVID-19 and Human Capital” which brings the forecast for Europe and Central Asia countries… Mai mult

A new US-Romania agreement in military field – a 10-year plan to strengthen defence in Black Sea area

Defence Secretary Dr. Mark T. Esper met on Thursday at the Pentagon with Romanian National Defence Minister Nicolae-Ionel Ciuca and the two signed a “defence… Mai mult

Romania’s direct investments abroad – EUR 324 million in 2019: Cyprus, the most important destination

The balance of Romania’s direct investments abroad amounted to EUR 324 million in 2019, according to data published on Wednesday by the National Bank of… Mai mult

Analysts: Watch out, neither over 5% growth nor wage increases are sustainable

de Adrian N Ionescu 29.5.2017

The bad news is that the economy cannot grow sustainably by 5% based only on monetary, fiscal and salary stimuli,” said Valentin Lazea, Chief economist of the National Bank of Romania (BNR), quoted by Agerpres.

There might also be a good news: “the economy can be brought to a 5% growth if a comprehensive program of structural reforms regarding the capital, workforce and productivity is implemented,” added Valentin Lazea.

At the same time, the European record of Romania’s economic growth in the first quarter, of 5.7%, “is contradictory as a puzzle, since, against such a high rate of economic growth, the VAT collection was disappointing and the profit of companies declined in nominal terms,” said Ionut Dumitru, President of the Fiscal Council, in an interview with Reuters.

The three elements that “form the gross domestic product (capital, workforce and productivity, or the so-called total productivity of factors) registered losses, post-crisis involutions“, says Valentin Lazea (foto).

The BNR Chief economist says that foreign direct investment has declined from EUR 7.3 billion a year between 2004 and 2008 to an annual average of EUR 2.5 billion between 2009-2015. So “in the post-crisis period there was a EUR 25 billion lower amount entering Romania in five years,” explained Valentin Lazea and mentioned that he speaks in a personal capacity.

Also, the new workforce entering paid employment at the age of 18 accounted for an average of 365,000 people per year between 2004-2008, while in 2009-2015 it decreased to about 250,000 people per year, following the fast decline of the birth rate after 1990. Productivity is affected by the quality of the education system. The market suffers from an uncovered demand of skilled workforce.

Romania can afford a growth rate of 3 – 3.5% without affecting the budget deficit, external deficit, public debt or inflation, according to the estimates of several institutions, including BNR, the IMF or the European Commission, Valentin Lazea reminded.

And a budget deficit of 3%, as registered last year, “is not optimal,” but a threshold “which an economy may reach in the worst times, that is, when the economy stagnates or moves downward. (…) 3% is not a target to be achieved year after year, because the question is what we will do when the economy, which now grows by 5% a year, will decelerate to 0 or 1 or – 2%, where shall we go then with the deficit? This is not understood and there is no will to understand it,” warned Valentin Lazea, quoted by Agerpres.

At the same time, the unitary pay law for public servants will increase the wage costs in the public system up to 12% of GDP in 2022, from 8% today, according to the President of the Fiscal Council, Ionut Dumitru (foto).

This is a very fast wage increase in the public sector that will raise sustainability issues. This law is needed in the public sector, where there are big wage discrepancies. But Romania now faces a workforce crisis. Pressures put on the private sector will increase as wages are already lower here than in the public sector,” said Ionut Dumitru in an interview with Reuters Central & Eastern Europe Investment Summit organized in his office at Raiffeisen Bank Romania where he is Chief Economist.

In spite of the budget surplus registered in the first quarter, the European Commission (EC) warned Romania on a significant deviation in 2016 from the adjustment path set to reach the medium-term budgetary objective (MTO) and urged the European Council on Monday to impose on Romania to take the necessary steps in 2017 to correct the deviation.

The EC recommends Romania to ensure that the nominal growth rate of the net primary public expenditure does not exceed 3.3% in 2017, corresponding to an annual structural adjustment of 0.5% of GDP, which would place the country on the right track to MTO.

The European Commission estimates that Romania will collect this year tax revenues equivalent to 25.4% of GDP, well below the EU average of 40%.

Romania spends almost 20 percent of GDP on wages in public sector, pensions, and social assistance, which leaves little room to investment in a country where 40 percent of roads are paved and hospitals are decades old, recalls Reuters.

The fiscal perspective complicates even further because of the Government’s intention to reform the tax system in 2018 by eliminating the 16% flat tax and replacing it with a household tax accompanied by several exemptions. The draft is still work in progress at the Ministry of Finance, but details needed to assess the budgetary cost of this reform are lacking.

“I believe it is premature to expect that we can apply in 2018 a system that raises so many issues which we are not technically prepared to manage,” said Ionut Dumitru.

Romania “is on the wrong way” with the budget deficit, said in his turn Valentin Lazea, who mentioned that while all the countries that exceeded the 3% limit – reduced it to lower levels, only Romania, France and Spain will have a deficit of more than 3% or close to 3%.

Mergeți în homepage ›

Publicat la data de 29.5.2017

Lăsați un comentariu


New Renault boss: “Dacia is a miracle. It's time for the brand to flourish"

Luca de Meo (foto), the new general manager (CEO) of Renault group, considers that Dacia project proved to be a miracle and that no one… Mai mult

Pentagon transforms Campia Turzii unit into a NATO air hub at the Black Sea

A former Soviet airbase in central Romania could become a hub for US Air Force operations in south-eastern Europe, where the Pentagon is seeking to… Mai mult

Nuclearelectrica shareholders approved to terminate negotiations with Chinese for building reactors 3 and 4 from Cernavoda

Nuclearelectrica's Board of Directors has been mandated to initiate proceedings to terminate negotiations with China General Nuclear Power Group (CGN), as well as legal effects… Mai mult

Renault holds expansion of its plant in Romania, 15,000 jobs cancelled at global level

"Putting capacity growth projects planned in Morocco and Romania on hold" - is one of the measures included in the draft plan of Renault Group… Mai mult

Romania is a net importer of electricity in 2020 as well

Romania imported an amount of electricity of almost 796 GWh in the first month of this year, by more than 36% above what it exported… Mai mult

Shareholders of Galati steel plant promise investments of one billion euros

GFG Alliance has committed to invest one billion euros to upgrade Galati steel plant in order to reduce emissions and increase production. Another EUR 1… Mai mult

Transport Ministry announces it has sent to Brussels the financing request for Sibiu - Pitesti highway

The Transport Ministry, as the Intermediate Body in Transport, approved the financing request for the project "Construction of Sibiu - Pitesti highway", Sections 1, 4… Mai mult

Romania and Juncker Plan: EUR 720 million attracted, of which 35% by Transgaz for BRUA

(The map of investment financed through Juncker Plan, by GDP share. Darker colours mean higher shares) The operator of national natural gas pipelines, Transgaz (TGN)… Mai mult

Top 3 reasons why young people leave Romania

Lack of trust in authorities, corruption and low living standards are the main reasons why young people leave Romania. The data is part of a… Mai mult

IMM Invest Romania – program implementing rules have been published

The Ministry of Public Finance announces that it has issued the methodological norms for the implementation of the Program for supporting small and medium-sized enterprises… Mai mult

Pollution import and car park expansion: comparisons with the other EU states

Romania is the EU country with the fewest cars in terms of the number of inhabitants, according to data recently published by Eurostat. We appear… Mai mult

Government is trying to save budget deficit: reductions in public administration system, cancellation of bonus for harmful conditions, excise duty on soft drinks

The Government is preparing the public for the first measures aimed at avoiding the budget slippage, which would be applied by the PSD-ALDE government. News… Mai mult

Laura Codruta Kovesi remains alone in the race for European Chief Prosecutor

French Prosecutor Jean-Francois Bohnert will be appointed as head of the European Financial Prosecutor's Office, a position for which he was heard on Thursday, 11… Mai mult

Romania - EU country with highest risk of dying in a road accident, Bulgaria is quickly decreasing number of victims since it built motorways

Romania recorded the highest road deaths in the EU also last year, with 96 deaths per one million inhabitants in 2018, almost double the EU… Mai mult

Latest developments in progress at Health Ministry: Differentiated wages based on performance, competitions organised at a regional level not by hospitals

Sorina Pintea announced on Thursday further new changes that will be brought to the functioning of the health care system, including new rules for employment… Mai mult

ANAF changes selection procedure for liquidators. Main changes

The new order on approval and selection procedures for insolvency practitioners is an important step to a very good direction, industry experts say. ANAF is… Mai mult