Salary increase, VAT cut will fuel consumption next year, imports to increase – analysts say

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The increase in people’s revenues and the VAT cut will fuel the continuous growth of consumption next year, however stimulating imports. Romania needs to carefully manage the economic growth in order to avoid going back to the imbalances before the economic crisis, PwC says.
“In Romania consumption is growing 6-7% per year, given the growth in revenues and the VAT cut for foodstuff. As of January 1, 2016 the standard VAT will also be cut, while salary increases will be operated for the public sector, so we expect an increased consumption next year. Unfortunately, this trend will stimulate imports, which could lead to an increase of the trade balance deficit and even to pressures on the national currency for devaluation. Romania should carefully manage the acceleration of economic growth in order to avoid returning to the macro-economic imbalances before the financial crisis in 2008-2009,” said Bogdan Belci, partner, Management Consultancy, PwC Romania.
According to PwC economists, both drivers of consumer spending – real income and the savings rate – also played a role in this trend.
Recent trends regarding consumer spending show an increase between 2 and 4% as compared to last year in real terms in most Western economies, which is good news for retailers and in view of Christmas.

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