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KeysFin analysts: Fiscal and salary pressures will affect the state budget. Economic growth of 4-4.1% in 2017
Fiscal and salary pressures will strongly affect the state budget, economic growth will slow down and inflation expectations will grow in 2017, according to an analysis based on questions addressed to companies in different fields of activity.
“Although GDP has grown by 8-9 billion euros per year, state incomes remained constant at 23 billion euros. Fiscal and salary pressures will strongly affect the state budget if there will not be solutions to make budget expenses more efficient. The government will have to choose between making reforms to honour promises or to expand financing sources. In the last 5 years authorities borrowed from banks the equivalent of 20 billion euros. The same amount as the one borrowed from IMF and WB to get out of crisis, KeysFin analysts say in their study.
According to them, investments are needed to generate development opportunities, especially in infrastructure. A sector which is not affecting Romania’s competitiveness. Building highways and rehabilitating railways should become a priority, they say.
As for economic growth, 53% of managers questioned estimate a GDO advance between 4 and 4.1%, 28% of them see an evolution between 4.2 and 5% while 13% thing GDP will grow by less than 4%.
The people questioned say Romania’s economy will continue to grow in 2017, but less than last year, on the background of a temperate domestic consumption and foreign risks.
According to Keys Fin analysis, even though measures of fiscal relaxation, from VAT reduction to 19% to the elimination of several taxes, next to the rise of lowest salary per economy as of February 1, 2017, should theoretically stimulate additional consumption, most businessmen are cautious about the continuation of the accelerated economic growth rate.
“Temperate economic growth was pointed out by the latest data of the National Statistics Institute. In quarter 3, economic advance was 4.4%, while in quarter 2 GDP had grown by 6%.
Asked which are the main 2017 challenges, most managers (62%) estimated a temperate consumption increase, 43% referred to uncertainties concerning world economic evolution, 37% referred to possible fiscal measures, while 24% indicated a potential inflation increase. Investors included in this chapter the evolution of the main currencies and persistent financial blocking.
According to them, it is hard to think that the Romanians’ consumption appetite would reach the record level of 2016 when there are significant inflation expectations.
“The increase of the lowest salary as of February 1 will lay pressure on companies and it could lead to a general price increase. Inflation pressures will grow and imports could grow, on the background of limited domestic offer,”KeysFin analysts say.
According to them, inflation rate in 2017 will reach 2-2.1%.
On the other hand, 76% of people interviewed estimate that the national currency will remain predictable in 2017. Euro will be quoted between 4.45 and 4.55 lei, with small fluctuations in the spring and fall.
Asked about what measures meant to ensure economic stability and local business impulse businessmen talked about the predictability of fiscal frame and the impulse on local business, businessmen spoke about the predictability of of the fiscal frame. They also invoked the need to reduce state bureaucracy and stimulate economic activity through durable investments, especially in infrastructure.
At foreign level, investors questioned by KeysFin remark challenges generated by Brexit and the plans of the new Trump administration, as well as at European political level, where extremist tones take shape.
The Keys Fin barometer about Romanian economy was made over December 1 and 30, 2016, on a representative sample of 150 companies in various field of activity, from trade to financial services, agriculture, energy, IT and so on.