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KPMG: Business environment's confidence adversely affected by uncertainties arising from recently adopted fiscal measures
Uncertainties arising from the recent fiscal measures adopted by the authorities have adversely affected the confidence of the business environment, says Ramona Jurubita, KPMG Romania Country Managing Partner, as cited in a company release.
"Romania's future growth potential remains high and this can be fully exploited in a framework where fiscal and legislative policies are predictable, and by laying emphasis on the improvement of the country's infrastructure. However, the uncertainties related to the fiscal measures recently adopted by the authorities have adversely affected the confidence of the business environment. The increase in the VAT rate for certain goods and services and the higher excise duties on fuels, the introduction of new taxes, including the minimum turnover tax for large companies and the additional taxes for credit institutions, along with increased tax rates on turnover are expected to push inflation in 2024 on a higher trajectory than initially anticipated and, in addition, to negatively affect demand. Despite significant investments supported from European funds, there is a big question mark related to how these fiscal changes will influence both economic growth and macroeconomic imbalances in the short term," said Ramona Jurubita.
According to the KPMG Global Economic Outlook report, Romania's short term economic prospects are influenced by uncertainties related to the correction methods of both the budget deficit and the current account deficit.
After witnessing a strong growth of 5 percent in the first three quarters of 2022, the Romanian economy saw a sharp slowdown, advancing just 1.4 percent in the same period of 2023. High inflation eroded the households' purchasing power and acted as a headwind to private consumption, which had been the main driver of economic growth in recent years. Even so, Romania's economy had one of the highest growth rates in the region, estimated at 1.8 percent in 2023.
Romania's economic growth outpaced that of the countries in the region, despite the ongoing conflict at the border with Ukraine. The average annual inflation rate continued to decrease in 2023, and this trend is expected to continue in 2024 and inflation to reach approximately 6.9 percent.