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October 25, 2021

Government relies on consumption to stimulate growth

The government and the National Bank of Romania (BNR) are analysing economic policies aimed at restoring consumption, as a driver of economic growth, Mediafax reports. The ruling programme however provides only for a recovery of salary cuts, and mentions nothing about a possible reduction of social contributions (CAS), the Executive announced. “Consumption has to resume in order to secure a sustainable economic growth, and we analyse the economic policy measures that can be enforced with this regard,” governmental spokesman Dan Suciu said at the end of a meeting between Premier Mihai Razvan Ungureanu, Finance Minister Bogdan Dragoi and the Governor of the National Bank, Mugur Isarescu.According to Suciu, the economic growth indicator used in restoring salaries throughout the public sector at their initial levels refers to the whole year 2012, not just Q1, when economy might contract compared to the last quarter of 2011. He added that these measures depend on the state’s ability to boost incomes to the budget, also by curbing, or “at least tempering” tax evasion, and securing economic growth.Asked by journalists about how authorities will increase salaries in the public sector on June 1st, although the Law of Fiscal Responsibility explicitly prohibits such decision six months before elections, the government official said that, “from a legal perspective,” this will be a restoration of salaries. However, Suciu added that pensions will not increase in 2012.Premier Ungureanu informed the governor that he intends to increase salaries in the public sector by a percentage that is still to be decided, and Isarescu told him that the decision exclusively belongs to the government and he is interested in an increase of consumption, official sources said. One of the variants being analysed provides that salaries will be restored in stages, the first being scheduled for June and the others due later this year, added the sources.In his turn, the Finance minister said that the government wants to increase the incomes of population, but within limits that will allow financing this measure in the coming years too, while keeping this year’s inflation target at 1.9 pc of the Gross Domestic Product (GDP), so any surplus will depend on economic growth. He added that raising the incomes of population must not pose problems in the coming years, as this should be accompanied by a sound and healthy economic growth. “We do not want to repeat what happened in 2008, when salaries and social payments increased by 50 pc,” Dragoi warned.The Finance minister added that authorities will prioritise investments and spending, as there already were talks with officials of the Ministry of Development, and the Ministry of Transport. Talks about prioritising expenses will be held with all ministries, he added.

Impact of salary increases: RON 2 bln, 5 pc CAS decrease: RON 2.3 bln

Raising salaries in the public sector by 16 pc in June this year could have an impact worth RON 2 bln upon the budget, while the CAS decrease by 5 percent points would put a strain of RON 2,3 bln on state coffers during the last 7 months of the year, Dragoi added.According to the minister of Finance, economy might contract in the first quarter of the year, against the last quarter of 2011 – which would mean entering technical recession because of weather conditions, but the GDP will advance by 1.5-2 pc vs. the first quarter of last year.

Suciu: Government maintains initial economic growth forecast

The government maintains its economic growth forecast assumed at the end of last year, because economic growth can still occur in 2012, despite a weaker result in Q1, government spokesman Dan Suciu said Friday.“If we consider the quarterly evolutions, which give us the chance of a coherent and sustainable economic growth for the whole year 2012, we are still on schedule and have no reason to reconsider this. Despite the winter and snow, figures do not show this quarter being worse than the first quarter of last year. We can be in recession this quarter, but still conclude 2012 with economic growth, so we maintain the growth forecast assumed at the end of last year. Now, at least, there are no reasons for seriously revising this figure,” Suciu said. He added that even the term of recession is a “slight overstatement” of the existing situation, although some correlations can be technically made.On the other hand, the Ministry of Public Finance (MFP) will analyse the situation of the fight against tax evasion at the end of the 60-day deadline given by the premier for improving the tax collection by 1.5 pc of the GDP. After the end of this interval, authorities will decide what new measures are necessary, Minister Dragoi added. Additionally, MFP will choose the private management of the lottery operator Compania Nationala Loteria Romana, with the purpose of improving the efficiency and market presence of the company.

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