The general perception is that Romania has been making important economic progress, managing to overcome the economic crisis, Andrea Schaechter, the head of the International Monetary Fund (IMF) delegation in Romania said Friday at the New Year’s Reception of the Romanian-German Chamber of Commerce and Industry (AHK Romania).
According to IMF representative, Romania has made an impressive progress, managing to overcome the crisis, which means that it enjoys now from a complete economic foundation. “The country reduced its fiscal deficit by more than 6.5 per cent of the GDP. Romania is also among the 11 member states that are no longer subject to the excessive deficit procedure. The current account deficit had reached a maximum level of 14 per cent and came down to almost 1 per cent of the GDP, which is, again, impressive. Last year, Romania excelled when it came to economic growth. However, this doesn’t mean that unemployment is no longer a problem. Unemployment among the youth exceeds 20 per cent and this is something that must be treated with seriousness. The general perception is that there were important achievements”, said Schaechter.
On the other hand, it is very important for the Romanian economy to be prepared to deal with the problems that appear at global level, the head of the IMF delegation continued.
Also, the head of the IMF said that Romania has deficiencies in infrastructure, especially in the energy and transport sectors, which must be solved.
“The deficiencies in infrastructure must be solved, especially in the energy and transport sectors. From this viewpoint, Romania currently remains behind other states in the European Union. In the energy sector Romania needs to invest tens of millions of euros. Only then when the prices will be established of a correct manner, and the same things with the stimulants, the investors will come and evaluate the opportunities to invest and obtain profit. On the other hand, let’s not forget about the household consumer, who also needs protection. Romania could become an exporter of energy”, the IMF representative said. She also mentioned that Romania needs to speed up EU fund absorption, even if the current percentage is a good one.
President Basescu: I support agreement continuation, but not pointless fees
Attending the event, president Traian Basescu maintains the idea of no ‘dispute’ between him and the IMF and that he is a supporter of continuing the agreement Romania has with the IMF, but he does not approve of charging pointless fees. ‘I shall unreservedly support keeping the current excise on fuels and I am not an enemy of the liberalisation of the energy prices, be them the electricity prices or the gas prices. (…) I insisted in underscoring these things, as I did not want people to understand that there could be a dispute between me and the Fund. I am certainly a supporter of continuing the Agreement with the Fund. (…) At the same time, however, I do not want to impose pointless fees to make pointless expenses in the state budget. I am mainly interested in an as small as possible deficit, but the quality of the expenses in the state budget to reach this deficit is very important. I would like very much for Romania’s state budget to have high quality expenses, not expenses creating the impression that the times before the crisis could come back,’ Basescu said. The Romanian president reiterated the fact that the economic measures of 2010 were the ones having led to economic growth in the following years.
Increasing competitiveness should become the first objective of the government at home and, while the private sector is competitive, the big problem is with the state sector, President Traian Basescu also stated. According to him, Romania’s major objective is to continue with the European integration process, while specifying that our country cannot remain economically, socially and politically outside a ‘powerful process of integration in the European structures.’
ING: A possible termination of the accord, without major impact on the exchange rate
“Thursday news was not favourable to the RON, with the president saying that he opposes the enforcement of the special excise duty on fuel agreed upon by government and international financers. (…) The latest comments hint to the opposite direction and cast doubts over the preventive IMF stand-by financing agreement for 2 years, worth EUR 4 bln. There are increasing chances that our expectations are soon tested about a possible termination of the financing agreement not having a major impact on markets,” reads a note issued Friday by ING Bank. For now, however, we are not worried, because the respective news about these risk increasing did not have a visible effect on markets,” adds the document. “Missing a direction, the RON persisted in reduced intervals around 4.53/EUR with declining volumes this week. We further expect the RON to get out of this climate and appreciate, as the bets against the local currency seem to have been largely discouraged by the supposed actions of BNR,” the ING analysts added.
Romanian unions propose differential income taxation
The Romanian trade unions on Friday proposed the IMF delegation that the flat tax rate be dropped and differential taxation be introduced, CNS Cartel Alfa National Trade Union Confederation president Bogdan Hossu said after the meeting with the IMF delegation. ‘We back the drop of the (16 per cent) flat tax rate and the introduction of the differential taxation of incomes, since it is only in this way that the formation of a middle class in Romania can be encouraged. Also, if a 5 per cent cut in the social security contribution is achieved, then half this move must be operated at the employees and half at the employers’, Hossu said. He communicated the international lender representatives that the Romanian authorities should find solutions to complete the state budget by ‘end-of-the-line’ taxation measures. ‘For example, they could introduce a new profit tax for the units recording very high profits, such as Petrom,’ he said.
German investments exceed EUR 6 bln
President Traian Basescu stated that German investments in Romania exceed EUR 6 billion, which makes Germany the third largest investor in the Romanian economy. “Perhaps the German investors’ most important contributions to Romania were business management, fairness in conducting business, and the fair business environment characterizing the companies they set up here, in Romania,” Basescu said. He pointed out German exports and imports experienced 8.4 per cent and 6.5 per cent increase, respectively, in the first nine months of 2013. The President also underlined Germany’s role as Romania’s both economic and political partner within the EU.