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Editorial - Bracing for ripple effects of global financial shocks

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Soon after the collapse of Silicon Valley Bank its parent, SVB Financial Group, has filed for bankruptcy protection. SVB was the biggest bank to fail in over a decade, and media reports emphasize that the developments have generated concern among its customer base.
This side of the Atlantic, UBS agreed to acquire troubled rival Credit Suisse in a three billion euro deal in bid to calm global finan­cial markets. In Romania, the authorities and central bank (BNR) officials initially gave as­su­rances that the economy was not in any danger. However, according to media r­e­ports, BNR Governor Mugur Isrescu has recently admitted that the Romanian banking sector is facing a series of vulnerabilities.
On a different topic, a recent study - Taxation of the Informal Economy in the EU - carried out by the European Parliament's Department for Economic, Scientific and Quality of Life Policies at the request of the Economic and Monetary Affairs Subcom­mittee on tax matters (FISC) has found that Romania has one of the largest shadow economies in Europe. Estimated at 29% of the official GDP, the shadow economy here is only smaller than those of Bulgaria (33.1%), Turkey (32.9%) and Croatia (29.7%).
The report emphasized that Romania’s shadow economy declined between 2003 and 2019 from 33.6% to just under 27%. "This is a significant decrease, although there were some fluctuations along the way, no­tably in 2009 and 2010, these changes were very small. Various tax and labour market policies over the years and the migra­tion of many citizens to other EU Member States may explain this decline in the trend of Romania’s shadow economy." However, the study showed that the size of the shadow economy in Romania increased in 2020 to 29.3%."It fell slightly in 2021, but our estimates forecast a slight increase for 2022."
The study also found that the Romanian shadow economy was "mainly driven by the level of self-employment in the country, indirect taxes, low tax morale and unem­ployment rate, respectively." The study noted that "other drivers like the regulatory burden, personal income tax and GDP growth are also statistically significant in our model but contribute less in explaining the existence of the shadow economy in the country."
Meanwhile, provisional data released by Romania’s statistics authority (INS) show that the country's economic output rose by an annual 4.8% in 2022, slowing down from a 5.8% increase recorded in 2021. Romania’s GDP rose by 4.6% in the fourth quarter of last year, after a 3.8% annual rise in the third quarter, according to INS' unadjusted data.
On a quarterly comparison basis, Roma­nia’s GDP edged up by 1% during Octo­ber-December, following a 1.2% quarterly growth in the third quarter, seasonally ad­justed data showed.
Find more opinions and predictions about domestic and global economic and geopo­litical trends in this issue of Business Arena. As always, we continue to keep an eye on all the issues affecting the business community.

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