SIMILAR ARTICLES

Four impact scenarios of OUG 114, as they were presented by Florin Georgescu to Liviu Dragnea and C.P. Tariceanu

The tax on bank assets, called the “tax on greed” by OUG 114 authors who imposed it, may reduce the economic growth by 0.6-1.1 percentage… Mai mult

Labour cost increase by field of activity. Remarks

Hourly labour costs grew by 13.09% in the fourth quarter of 2018 compared to the same period in 2017, according to data announced by INS.… Mai mult

Bulgaria vs. Romania: Reform and results of tax authority in Sofia and counter-reform and its consequences in Bucharest

Bulgarian tax authorities, which have successfully implemented a modernization program with World Bank’s support, a program that Romania abandoned after six years of delays and… Mai mult

Traditional budget surplus in January – 3 times lower than in 2018 and 5 times lower than in 2017

The general consolidated budget ended the first month of 2019 with a surplus of RON 717 million or 0.07% of the estimated GDP for the… Mai mult

Finance throws away for good contract for ANAF modernization with World Bank: 6 years and EUR 18 million down the drain

Sources close to talks with the World Bank have stated for cursdeguvernare.ro that the Finance Ministry notified the financial institution in November 2018 that it… Mai mult

Cronicile

Romania lost one more key indicator on the European macroeconomic scoreboard: rhythm of labour cost increase

de Marin Pana , 26.3.2018

After it reached, two years ago, among top states that met most economic stability criteria imposed by the Macroeconomic Imbalances Procedure Scoreboard (MIPS), with 13 criteria reached, out of 14 (the net investment position could not be but much below the level of -35% of GDP given the significant foreign investments and the totally insignificant Romanian investment abroad) Romania started to lose from the compliance with these criteria and the most recent alert indirectly issued by Eurostat is the sharp rise in the labour cost by 14.3% in the fourth quarter of 2017 compared to the same period of last year.

In the report for the 2018 European Semester, Romania already registered + 6.0% (provisional value) at this criterion, for 2016, based on the data communicated by October 24, 2017. We already had only 12 criteria fulfilled out of 14, according to the official table published by the EU, after house prices slightly exceeded the 6% limit imposed for the annual change in house prices.

In the labour cost, in order to maintain the macroeconomic stability, the change allowed for an interval of three years is 9% in the Eurozone and 12% in the non-Eurozone of which we are part. Under these circumstances, if we put together 6% mentioned for 2016 and the 14.3% increase announced for the end of 2017, it becomes obvious that we shall lose one more stability indicator at the next revision of the MIPS table.

The problem raised is NOT related to a salary increase, otherwise quite natural given the low level compared to the European practice, or the share of labour remuneration in GDP, still relatively low. The problem is related to the rhythm of growth, that is, the discussion should not be on the matter itself, but, in mathematical terms, on its first derivate.

In terms of position, we are ahead of our neighbours Bulgaria (+ 12.2% in Q4 2017) and Hungary (+ 8.6%), followed by the Baltic countries, Poland, the Czech Republic and Slovakia. What tells us that there is an overlap between an objective tendency of a labour cost convergence, the more pronounced as countries’ level of development is lower, with a subjective one, which attempts to force the reasonable limits within which this growth can be absorbed by the economy.

The very fact that we are positioned ahead of Bulgaria, and not between this country and Hungary, as it would have been intuitively correct, offers arguments to draw attention to the pressure on the acceleration of consumption generated by the revenue growth. This may induce a further growth for the moment, but also involves the risk of some imbalances difficult to correct later.

Unfortunately, not even the reference to the evolution of the labour productivity over the last four years (on the idea that we have performed far beyond the expectations of those who have established the MIPS numerical requirements) justifies an increase in the labour cost at the rate that will be taken into account by the EU at the next publication of the macroeconomic instability procedures.

For consistency, we remind how the increase in the labour productivity between 2014 and 2017 is, according to BNR statistical bulletin 1/2018:

*

  • Year
  • Evolution of labour productivity

*

The value +6.6% recorded last year is a respectable one, but the data recorded in 2015 and 2016 are not encouraging at all. Cumulated over a three-year period (2015-2017) we have marked an advance of only 6.2%, which shows that we do not quite have a starting point that would justify the exuberance in terms of salaries.

At the same time, the access to the EU financial resources, quite important for one of the poorest EU budgets in terms of share of budget revenue in GDP (if we adjust Ireland’s statistical inflated GDP, it would be even the poorest one) will be, sooner or later, in one form or another, subject to compliance with or at least to the attempt of complying with common rules for macroeconomic stability.

But we are driving at this moment on the wrong way.

Mergeți în homepage ›

Publicat la data de 26.3.2018

Lăsați un comentariu


NEWS

ECOFIN / Tax havens list has been updated. Politico: Eugen Teodorovici took EU Finance Ministers by surprise

Finance Ministers of the EU voted on Tuesday at the third meeting of the Council for Economic and Financial Affairs (ECOFIN) chaired by Romania, the… Mai mult

March 15, 15:00, for 15 minutes: Romania really wants highways!

Dozens of companies, mayoralties, sports teams, public figures, organizations and many ordinary people joined the protest "Romania wants motorways". Of course, the country did not… Mai mult

Facebook has removed 30 pages and PSD propaganda accounts in Romania

Facebook announced Thursday that it has closed hundreds of false accounts promoting false content in the UK and in Romania and this is the first… Mai mult

Laura Kovesi, indicted in a second case opened by Magistrates' Investigation Section

Laura Codruta Kovesi was indicted on Thursday in a second case. The section for investigating the crimes committed by magistrates accused her of having led… Mai mult

Gold reserve was still untouched: Populist diversion or another act against the BNR’s independence

The draft law on the so-called repatriation of Romania's gold reserve is either a populist diversion or another attempt to remove gold from the administration… Mai mult

Magistrates’ protest, extended to 80 courts and prosecutors' offices. List of requests

The protest of magistrates from Cluj Napoca. More than 200 prosecutors and judges, with white bands on their arm, came in front of the local… Mai mult

Laws on judiciary, amended again by OUG: judges who were once prosecutors may be appointed as prosecutors

The Government approved on Tuesday an OUG that was not publicly debated, which amends several provisions from laws on the judiciary that refer to prosecutors… Mai mult

"Iceberg" operation: ANAF announces that it selected 487 companies which are to be audited based on risk analysis

Virgil Pirvulescu, Vice President of ANAF at PwC Annual Tax Conference The National Agency for Tax Administration (ANAF) has identified 487 large and medium-sized companies… Mai mult

Commissioner Corina Cretu: There is a risk that Magurele Laser will not be completed during this budget implementation

In the absence of a rapid response from the Romanian Government to the European Commission, there is a risk that Magurele Laser can no longer… Mai mult

Romania joins countries that recognize Juan Guaidó as interim president of Venezuela

The Presidential Administration announced on Friday that President Klaus Iohannis, "as the head of Romania’s foreign policy decisions and Romania's representative at the external level,… Mai mult

AmCham Romania: Counterproductive public policies have reched an alarming level

Further to the message on the impact of OUG 114/2018 transmitted on Thursday to the organizations in the Coalition for Development of Romania (CDR), AmCham… Mai mult

Finance minister stopped borrowing money from the market. Teodorovici: We have funding resources for minimum six months

Minister of Public Finance (MFP), Eugen Orlando Teodorovici, has ordered to stop borrowing operations on the market because MFF would have all the money needed… Mai mult

BNR: If we sold foreign currency to defend Romanian leu, as PSD wants, interest rates would explode and ROBOR would go over 5-7 percentage points

The National Bank of Romania wants a "loyal cooperation" with the Ministry of Public Finance, and that involves a prior consultation with the central bank… Mai mult

Tax on bank assets was not included in 2019 draft budget

The tax on bank assets was not included in the 2019 draft budget, published on Thursday evening by the Ministry of Public Finance (MFP). According… Mai mult