Economic developments in Romania

At present Romania has the chance to enter a long cycle of more solid, sustainable growth, says the governor of the National Bank of Romania, Mugur Isarescu. The positive development of the economy also reflects the Romanians’ appetite for loans.

România Internațional, 07.05.2014, 13:27

The governor of the National Bank of Romania, Mugur Isarescu, has announced that Romania has reimbursed most of the 12-billion euro loan taken out from the IMF, and that by the end of the year the loan will be paid off without the population feeling the effects of reimbursement. He has explained that, over the past years, Romania has made important corrections both in the fiscal domain and the external balance of payments, with the effects of economic growth being mirrored in the living standards.

A national bank report shows that the improvement of economic activity in Romania continues to be boosted by the positive dynamics of exports and the favorable evolutions in the industrial sector as well as by the gradual consolidation of consumption. At external level, the current account and international reserves stand well, given that a substantial part of the public foreign debt has been reimbursed.

The good evolution of the Romanian economy is also reflected by the Romanians’ appetite for loans and the banks’ wish to give loans, which is indicative of recovery, after many years of stagnation. However the national bank governor has shown discontent with the high tax rates levied by the state, which he himself has to pay as the majority shareholder in a winemaking company.

Mugur Isarescu: “In one single quarter I paid 3 hundred thousand lei to the state. I say it publicly because I find these taxes too high. Maybe the new regulations regarding the reinvested profit will help us a bit.”

On the other hand, the government set January 1st 2019 as the new target for Romania’s joining the euro zone. This was announced by the Romanian minister delegate for budget, Liviu Voinea, in Brussels, at the EU finance ministers meeting. He also made public Romania’s convergence program proposed by the government for the period 2014-2017, which will be submitted to the European Commission.

The document provides, among other things, for economic growth and the creation of jobs by eliminating taxes on reinvested profit and reducing social welfare contributions as of July 1st 2014. The National Bank governor supports the reduction of the social welfare contributions, which, in his opinion, will have positive effects.

He nevertheless believes that for this measure to be adopted a strong political consensus is needed as well as an assessment of the consequences, especially those related to prices harmonization. According to Mugur Isarescu smaller taxes and broadening the tax base should be seriously considered by the authorities. He also pointed out that when the income tax was reduced from 40% to 25%, the collection of revenues to the state budget doubled by the end of that respective year.