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Economic growth gains ground

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By Cristian Cojanu
Good news keeps coming for the Romanian economy. Recently, the National Prognosis Committee has revised up the country's 2017 economic growth forecast to 5.6 percent from its previous 5.2 percent estimation. While expecting stronger economic performance in all sectors, the committee sees Romania's 2017 GDP at around 837.1 billion lei (181.9 billion euro), claiming that a 7.3 percent increase in household consumption would support the overall expansion.
According to media reports, the prognosis committee also expects industry to grow by 7.6 percent, services by 5.6 percent, agriculture by three percent, and construction by 1.5 percent. In turn, exports are forecast to grow by nine percent, while imports are seen gaining 11.5 percent in 2017. In turn, the country’s trade deficit is estimated at 12.54 billion euro.

Previously, in an end-August assessment, Fitch Ratings noted, however, that “pro-cyclical fiscal policy and rapid wage growth” had increased overheating risks. “Rapid growth has begun to presents risks to exter­nal indicators and there is also a risk of overheating as wages outpace productivity growth. The National Bank of Romania (NBR) estimates that the economy is opera­ting around 2pp above full capacity, and we expect the current account deficit to widen beyond three percent of GDP this year. The NBR also revised its inflation forecasts higher at its last monetary policy meeting on 4 August,” the recent Fitch report indicated.  
However, the business community has more pressing issues to worry about. The Government’s decision to introduce a mandatory split VAT payment system has attracted criticism from experts and businesses alike. In a statement on the issue, the Foreign Investors Council (FIC) emphasized that the Government’s measure would “have significant negative impact on businesses in Romania, be they large or small.” FIC added: “This measure will lead to major operational obstacles for all parties involved: the companies which will bear the burden of implementing this new system, the Treasury which will face an avalanche of requests for VAT accounts and ANAF which will have to approve a great number of transfer from VAT accounts as quickly as possible. FIC believes that before implementing this policy the Government should have consulted with the European Commission and, at the same time, run an impact assessment to understand the effects this will have on fiscal evasion and to estimate the implementation cost for the business environment.”

Business Arena will continue to keep an eye on all the issues affecting the business community, reflecting its views, hopes and challenges. For more on the most recent developments in business and economy, see this new edition of Business Arena, with the latest interviews and expert opinions.

The interview is also available in our print edition of Business Arena.

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