RSS
Financial-banking analysts: the consumption from the import puts pressure on inflation and on the depreciation of the leu
The Romanian economy presents a series of vulnerabilities, against the extreme threats and especially the domestic ones and growth based on consumption from the import puts pressure on inflation and the depreciation of the leu, showed on Wednesday the members of the Association of the Financial-Banking analysts of Romania (AAFBR).
‘From the macroeconomic perspective, the main domestic issue of Romania is the promotion of pro cyclic fiscal policies through reductions of taxes and increase of public expenditure, thus feeding the risk of some slippage which must be adjusted in the future. The focus of these policies is on the growth of salaries and pensions in a rhythm which the economy cannot be sustained’ the analysts showed during the 9th edition of the annual AAFBR conference, which took place at the headquarters of the BNR.
‘Thus, the limitation of the budgetary deficit in the threshold of 3% during the current year ‘ it is not a success de factor as the public investments record the minimum level of the last ten years, and the acceleration of the distribution of dividends from the profitable state-run companies is nothing but a temporary measure which will limit their potential for future development’.
According to AAFBR ‘ the growth of the population income does not reflect a more productive economy and supplementary consumption is oriented mainly to imports, feeding pressures on the growth of inflation and the depreciation of the local currency’.
From the perspective of the business environment, the active companies in Romania present a higher degree of vulnerability, as compared to the period 2007 – 2008 in the context where:
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The phenomenon of polarisation deepened, in the context of concentrating the income profits and liquidities with the most important companies;
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The local entrepreneur is very modest, in the context of the uncertainty created by the frequent fiscal amendments;
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The financing structure is lacking as the degree of endebtedness increased and the high share of the companies with negative own capital;
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The systemic risk increased due to the extension of the payment deadline between companies, thus increasing the interdependence between companies and the domino effect;
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The work market is under high tension due to the aging of the population, the increase of the migration phenomenon and the very high level of the inactive population.
„ ‘The growth of investments and productivity of the domestic companies, essential for the support of exports and the increase of the potential GDP cannot be sustained but by structural reforms in the efficiency of the collection of fiscal income, the development of the infrastructure, investments in health, education, as well as through the insurance of stable fiscal and judicial framework’ the analysts said.
Another warning of the AAFBR members refers to the reduction of the compulsory contribution to the pension funds administered privately. Pillar II from 5.1% as it is now to 3.75% starting with 2018. ‘This change is implemented although Romania committed through the Programme of Convergence to ensure a contribution of at least 6% of the gross income of the employees to the private pension funds to ensure the sustainable reform of the pensions system which at present is faced with a high deficit.
Externally ‘ 2017 meant a series of important events. Irrespective of the fact that we are talking about the increase of geopolitical tensions on the global stage, the uncertainties regarding the future of the EU, the imminent existence of a new monetary policy cycle for the US, the volatility for certain classes of assets, it is evident the fact that humanity is going through a stage of fundamental changes of social, political, economic and technological order’ the AAFBR members said.
In this volatile and unpredictable context, the domestic sustainability on medium and long term cannot be ensured but through the promotion of anti-cyclic policies and structural reforms concentrated on a strategic concept very well defined’.
Set up in January 2008, AAFBR is a professional organisation with almost 100 members from all the areas of the Romanian financial market –banks, insurance companies, brokerage companies, private pensions funds, international financial institutions. AAFBR is member of EFFAS (European Federation of Financial Analysts Societies). The annual AAFBR conference, the main event of the association tackles topical economic issues and gathers both participants from Romania and representatives of some international financial institutions.