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Study: Increase in public employees' salaries and consumer confidence to prompt domestic consumption revival
The increase in the salaries of public employees and the improvement in consumer confidence will most likely determine a revival of domestic consumption which could result in a 4 percent advance of the GDP, according to a survey on the business environment's expectations for 2016.
"All estimates converge to an increase of 6-7 percent in domestic demand, following the reduction in the average VAT quota of the daily consumer basket from 22.5 to approximately 14 percent and the 8 percent increase in the average salary," shows the semi-annual barometer conducted by KeysFin analysts and sent on Wednesday.
According to the survey conducted among business people, in reply to the question on how they see Romania's economic evolution in 2016, 57 percent of the respondents estimate a positive trend, while 28 percent see a moderate evolution, and 15 percent a negative evolution.
Compared with the economic barometer conducted over June 1 — 15, 2015, the percentage of investors who see the future in dark colours dropped from 33 percent to 15 percent, while the reserved estimations advanced from 18 percent to 28 percent.
The economic prospects in consumption could go along with the increase in investments in two key sectors of economy — agriculture and constructions.
In agriculture, the trend of the recent years showed a spectacular advance in the number of companies, from 8,067 in 2010 to 9,929 in 2014, whereas the turnover also soared from 11.8 billion lei to 20.8 billion lei (2010-2014). "The trend of the recent years showed that agriculture is going through a process of maturity and coagulation with concrete results and with technologies that eliminate increasingly more the risks of the past years — the weather developments. 2016, according to the business environment estimates, seems to be the best year of the past six," say KeyFin analysts.
In constructions, the loaning development on this segment, supported by the population's increasing demand following the decline in the prices in the real estate sector, can positively influence the economy, especially since this sector has a powerful horizontal development in economy.
"The Tax Code had over 135 modifications over the past seven years. The discussions with investors revealed the need for a stable, predictable financial framework, allowing them to make the business decisions on stable grounds. The VAT reduction in 2016 is a positive thing, however concerns are now directed to local taxes and fees, to the other fiscal levers, which, according to the public debates, are said to grow a great deal in 2016," the Keys Fin experts say.
Another investors' concern is the one related to the decisions of an electoral nature which the authorities might be tempted to make in 2016, a year with both local and parliamentary elections.
Same as in the case of the barometer of June, business people highlight as necessary measures the improvement in the fee and tax collection and European funds absorption.