The latest economic forecast on Romania’s
\neconomy issued by the European Commission shows the country has registered one
\nof the fastest growing GDP rates across the European Union. Furthermore,
\nestimates show this situation will not change throughout the forecast horizon,
\n2018 included, being backed by fiscal relaxation and pay-rises. Unemployment,
\nwhich dropped significantly in 2016, will continue to be at a low level in the
\nfollowing period of time, whereas inflation, which registered negative values
\nin 2016, will increase concurrently with the GDP. <\/p>\n
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According to forecasts, the budget
\ndeficit is likely to increase, following tax cuts and an increase in public
\nspending. Therefore, the European Commission fears Romania might exceed the
\ndeficit target set by the Romanian Government. Brussels has in fact sent a
\nletter to Romania on this issue, estimating that Bucharest may see significant
\ndeviations to its medium-term budgetary objectives, with its structural balance likely to
\nbe upset in 2017 and 2018. <\/p>\n
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Other estimates show, however, that in
\nthe following two years, Romania may see some of the region’s highest levels
\nboth in terms of consumption and economic growth. According to the state budget
\nendorsed by the Romanian Parliament, the
\nGovernment set a budget deficit target below 3% of the GDP, in keeping with the
\nprovisions of the Maastricht Treaty. In an interview on Radio Romania, economic analyst Cristian P\u0103un says we will very soon
\nfind an answer to all these questions, because real figures will soon start to
\nemerge: <\/p>\n
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The figures for the first month of the year have already been made
\npublic and they don’t look good. I’m convinced the same will be true of the
\nfigures for the first quarter of the year, because the governing programme lays
\nemphasis on the redistribution of resources rather than on real measures to
\nallocate resources. When you redistribute resources in society solely by
\nraising state sector salaries, you obtain these resources by exerting higher
\npressure on the private sector, which can no longer develop at the same pace.
\nThe economic growth of the private sector will slow down, while we will see
\nhigher consumption in the state sector, that is enhanced prosperity thanks to
\npay-rises. This is like taking from some people and giving to others. Overall,
\nthe effect is close to zero in terms of economic growth, because we practically
\nrelocate resources to another area within the national economy. This is the
\nactual effect of redistribution measures.<\/p>\n
<\/p>\n
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Other measures taken by the government include increasing the minimum
\nwage and reducing the level of taxation for small enterprises. Analyst Cristian
\nP\u0103un: <\/p>\n
<\/p>\n
\n
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If taken separately, these measures may be viewed by some as being good
\nmeasures. Raising the minimum wage is like a mouthful of oxygen for people with
\nsmall salaries and has been supported by many in Romania, particularly trade
\nunions, and reducing taxation for micro-enterprises has the same effect on
\nthese businesses. In business terms, however, the two measures are
\ncontradictory and the effect is close to zero in the case of a small business.
\nThis means that by increasing the minimum wage and reducing the level of
\ntaxation for small enterprises, we will not see more small enterprises emerging
\nor developing. Quite the opposite is likely, that is many of these small
\nenterprises might close, given that, according to statistics, companies’ salary
\nexpenses have increased dangerously in Romania, accounting for 35-40%. <\/p>\n
<\/p>\n
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The president of the Fiscal Council in Bucharest,
\nIonu\u0163 Dumitru, believes the 5% economic growth rate the 2017 state budget is
\nbased on is very ambitious, and in this respect, budget revenues seem far too
\noptimistic. The analysis by the European Commission is part of the European
\nSemester procedure and includes an assessment of the imbalances that still
\nexist in some member states. According
\nto these reports, the European Commission identified economic imbalances in 12
\nEU member states. The situation of these countries will further be monitored,
\nwhile Romania only received a formal letter from the Commission that did not
\nmention any economic imbalances, said the Bucharest authorities. <\/p>\n
<\/p>\n
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The Finance Ministry recalls that the Romanian
\nGovernment has pledged to implement a governing programme to bring about
\nsustainable development, ensure investment in infrastructure and create new
\njobs, while meeting the budget deficit target of less than 3% of the GDP. This target will be met, the Romanian
\nauthorities give assurances in a letter to the European Commissioners Valdis Dombrovskis and Pierre Moscovici,
\ndespite European Commission estimates that Romania will have a budget deficit
\nof 3.6% of the GDP in 2017. <\/p>\n
<\/p>\n","protected":false},"excerpt":{"rendered":"
European Commission report shows Romania had one of the fastest growing GDP rates in the EU.<\/p>\n","protected":false},"author":108,"featured_media":63758,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[43939],"tags":[29212,19347],"coauthors":[],"class_list":["post-88933","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-the-future-starts-today","tag-economy","tag-romania"],"acf":[],"yoast_head":"\n