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June 26, 2022

Economic analysts in ruling programmes: ‘Lie to me beautifully!’

They say everything should start from a stricter observance of property right and its guarantee, because the ruling programmes currently offer insufficient information to develop any scenarios and are populist.

Ruling programmes published by political parties in the election campaign are populist, unrealistic and will be redone right after December 9, being compared with the title of the ‘lie to me beautifully’ movie, economic analysts say, also reminding that Romania still has shortcomings in the area of property rights. ‘I have not spent too much time looking at them because history has shown that such programmes are soon forgotten about. (…) Both programmes propose tax cuts and that’s a very good thing. However, I had the feeling they were acting in the ‘Lie to me beautifully’ movie in politics,’ said Mihaela Hancila, chief economist Volksbank Romania, at the yearly seminar of the Association of Finance and Banking Analysts of Romania (AAFBR), Mediafax reports. After the debate on themes such as economic growth in 2013 and the financing in the local currency versus financing in foreign currencies, all analysts were asked by the press to say whether existing electoral programmes gave enough information to be able to develop scenarios regarding the following year budget and if they were credible. Hancila explained that, to be credible, such programmes should first propose measures for the improvement of tax harvesting and explicitly indicate financing sources. The Volksbank analyst believes a VAT cut to 19 per cent would be a welcome measure, as Romania has one of the highest sales tax rates in Europe. Despite that – she noted – our country still has one of the lowest receipt rates in that department. ‘The measure of cutting the social security contribution would also be very good, because now it is quite high and fosters tax evasion. (…) But I do not agree with dropping the flat tax. Equality should be valued more. Since benefits are equal (…) I don’t see why people who gain more should have to contribute more. A measure like that could perpetuate tax evasion,’ Hancila said.  UniCredit Tiriac chief economist Catalina Molnar had a rather trenchant stand, showing that the ruling programmes offered insufficient data to do any scenarios and were also populist. Both Molnar and BRD chief economist Florian Libocor say that the in-coming government should start addressing a number of problems from a stricter respect for the property right and its guarantees. Molnar gave the example of agriculture irrigation systems, a field where all governments had promised measures and intervention. She reminded of the particular case of a farmer who invested in his own irrigation system which was stolen in less than a year, the perpetrators never being identified and the owner never recovering his investment. ‘The observance of the property right is at least one first step. Sometimes I think people are afraid to build something because they know there is a risk they may be left without it,’ the chief economist of UniCredit Tiriac said.

Garanti Bank: Political stability, just as important

Garanti Bank chief economist Rozalia Pal said that, irrespective of the winner of the December legislative election, the new government would have to operate within the constraints of the existing agreement with the IMF, World Bank and European Commission. Pal thinks political stability is more important, reminding of the funds that left Romania during the summer months and warning that a long period of government instability would hurt Romanian economy even more. ‘As far as the budget is concerned, it’s an admirable thing that these ruling plans have been drawn up. However, it is pretty clear to me that they will be redone and it’s hard for me to believe that some of those measures will be opportune, I mean the resizing of some of the taxes (…). We could all see the consequences of similar changes two year ago. We saw them and hopefully have not forgot them,’ Florian Libocor said.The only analyst who shirked, not at all astutely, from giving a straight answer on the ruling programmes was the economist of BCR, Eugen Sinca. However, he addressed the topic of agriculture performance, revisiting the ideas of former BCR chief economist Lucian Anghel a month before, who was mentioning the need to have a programme encouraging owners to put their fragmented properties together, which is the condition for modern and cost-effective agriculture meeting the requirements of modern trade.

Lazea, BNR: What politicians propose is actually a reinforcement of an existing system  BNR chide economist

Valentin Lazea analysed the proposal to move to the so-called ‘regressive tax rate’ reminding of a recent article signed by Secretary of State Claudiu Doltu, indicating that, currently, there are differentiated taxation rates as, thanks to deductions, people on lower income do pay less than 16 per cent tax, in spite of the flat rate tax in place. ‘What politicians actually propose is a reinforcement of an existing system. I really cannot understand what they are after’, said Lazea, a professional known for his moderate positions in the area of fiscal policy. Prior to the debate, the adviser to the central bank governor, Lucian Croitoru, had said the main threat to 2013 economic growth  as well as the still big unknown was the philosophy of the budget for the following year, whether it would be pro-growth or limitative.



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