Central bank, top economists caution the future government on state budget, skidding

The central bank and top economists are waiting cautiously the first measures by the next government. Although the Social-democratic Party’s governing programme includes important tax cuts and wage increases, the economists warn a careful drawing of next year’s budget is needed, in order to avoid bringing negative effects to the economy.

Economists warn the budget will have to fit, despite the wage increases and tax cuts, into the 3% deficit agreed upon with the international financial institutions, digi24.ro reports.

Vice-Governor of the National Bank, Liviu Voinea, has said “Romania is in a favourable macro-economic situation, the risks have lower, however they remain significant.”

On the other hand, Erste analysts warn that the costs for borrowing money from the financial markets could grow in the coming months. They say the investors have given a respite to the governance to bring to front decisions in order to prevent the budget deficit increase.

“If the next executive maintains the budget deficit under control next year, then the funding requirements will be lower than in 2016, which would limit the growth in terms of bond yields. In the absence of fiscal tightening decisions, there is a high risk that the budget deficit goes above the target next year,” the Erste analysts say.

Cristian Parvan, chairman of the local employers’ investors says the money is not a problem. “Money is a relative issue, they’ve always existed and will be available.”

“We either succeed in collecting more money to the budget or we hugely restructure other areas of the budgetary sector. Or we increase the number of employees in the private sector, which would support the budget system through their taxes,” says the Chairman of the Fiscal Council Ionut Dumitru.

In his turn, Florin Jianu, chairman of the national council for SMEs, claims that “fiscal decisions have always had proper effects on the business environment.”

PSD’s governing programme

According to PSD’s governing programme, the following decisions are expected:

  • Minimum gross wage to increase in 2017 from RON 1,250 to RON 1,540; in 2020 will reach RON 1,750;
  • Average gross wage to increase in 2017 from RON 2,800 to RON 3,100. In 2020 is expected to reach RON 3,950;
  • The pension point is to reach RON 1,000;
  • Minimum guaranteed pension to reach RON 520;
  • The health social security contribution (CASS) for pensioners – zero;
  • The share of social security contributions paid by employees to fall from 40% to 35%.
CASSCristian ParvanErsteIonut DumitruLiviu VoineapensioneerspensionspsdrisksSMEsocial security contributionsstate budget deficitTax Codetax cutswage increases
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