Inflation at a historic low
The annual rate of inflation fell to -2.7% in February, from -2.1% in January, a new historic low, according to the data published on Friday by the National Institute of Statistics (INS). In February 2016, the percentage of goods and services, which saw a decrease in price compared with February 2015, was 59.3%, with those that saw an increase of up to 2.5% accounting for 24.1%. Goods and services whose prices increased by more than 2.5% accounted for 16.6%. The price of foodstuffs increased by 0.34% in February compared with January 2016, but was 6.47% lower than in February 2015. The price of non-food products decreased by 0.27% compared with January 2016 and was 0.54% lower than in February 2015. Services were on average 1.14% cheaper than in January and 0.31% cheaper than in February 2015.
2019 remains the target year for adoption of the Euro
In the spring of this year, in April at the latest, the Government will send the European Commission a new convergence plan, whereby Romania will announce whether it will keep 2019 as the year for adopting the Euro as its currency or whether it will postpone the date, which officials no longer regard as feasible, but rather as merely a political message of stability and confidence in the economy.
The Romanian economy grew by 3.7% in 2015
The estimated GDP for 2015 was 710.26 billion lei at current prices, an increase in real terms of 3.7% compared with 2014. All the sectors of the economy contributed to the increase in GDP, except agriculture, forestry and fishing, according to the National Institute of Statistics. Data on agricultural production in 2015 will be published by INS in May, but estimates show that 2015 was a bad year for agriculture, particularly maize production. Compared with the third quarter of 2015, GDP in the fourth quarter was 1.1% bigger in real terms. Compared with the same quarter in 2014, GDP saw an increase of 3.7% overall and 3.8% (seasonally adjusted).
Romania has one of the highest economic growth in the European Union, but at the same time it is one of the poorest member states, which shows that the country’s model of growth is not to the benefit of its citizens. Angela Filote, head of the EU Representative Office in Romania, says that the European Commission cannot encourage such a model: “Romania has one of the highest growth rates in the European Union, but at the same time it is ranked among the poorest EU countries. This says to me that the current model of growth is not working in the interests of citizens. It is not a model we encourage,” she declared on Wednesday, at a press conference to present Romania’s Country Report at the EU Representative Office in Romania.
Changes in the structure of the economy
Cursdeguvernare.ro cites an analysis published by the National Forecast Commission of Forecasting (CNP) at the beginning of March, in which it emerges that industry as a percentage of GDP decreased by 1.6 points in 2015 to 23.3% and is set to fall to 22.8% in 2016. From 2017, industry as a percentage of GDP is set to increase, reaching 23.7% by 2019, although this is still less than the 2014 level, which was 24.9%. In 2015 industry as a percentage of GDP was offset by a rise in the percentage of services, from 51.6% in 2014 to 52.9% last year. At the same time, services made the largest contribution to the growth of GDP in 2015, an increase of 2.6%. Industry’s contribution was modest, at 0.5%, construction accounted for 0.4% (up from 0.2% in 2014), net taxes on products for 0.7% (an increase from 0.5% in 2014), but agriculture dragged economic growth down, with a contribution of minus 0.5%.
Sources: CursdeGuvernare.ro, Hotnews.ro,Mediafax, Profit.ro
Promise for investment
In the following period the government will focus on accelerating investments and structural reforms, declared Minister of Finance, Anca Dragu, at the ECOFIN Council in Brussels. “In the following period we will focus on accelerating investments and structural reforms, priorities also recognised in the countryreport. We have pushed through a package of laws on public acquisitions, we have set underway the process for priorities also recognised in the country report. We have pushed through a package of laws on public acquisitions, we have set underway the process for prioritising investments and creating the legislative and operational framework for implementing projects through public-private partnerships,” declared Anca Dragu, according to a communiqué issued by the Ministry of Finances. According to information quoted on profit.ro, it is expected that the governmental investments programme will make itself felt in the real economy. Public investments, particularly in infrastructure, are a factor for stimulating the real economy, for horizontal engagement of producers and service providers.
Conversion to Swiss franks
OTP Bank Romania is extending by one month its programme to convert loans in Swiss franks, in order to provide additional time for decision-making to 3,500 clients who have expressed an interest without formally applying in the programme to take part, declared the bank’s director, Laszlo Diosi to the MTI press agency. Hitherto, 8,500 clients with such loans have expressed an interest in the programme, of which 5,000 have formally applied, with 3,000 having signed conversion contracts. The benefits that OTP Bank Romania provides to those taking part in the programme are worth thirty million Swiss franks. As part of the programme, OTP Bank offers cancellation of a part of the debt and lower interest to more than ten thousand clients, if they accept the conversion of their loans from Swiss franks into euros or lei.
A quarter of Romanian employers intend to hire staff in the second quarter, mostly in industry, seven per cent predict reductions in staff, particularly in the energy, water and gas sectors, and sixty-six per cent will keep the same number of employees, according to the most recent Manpower study on Employment and Labour Force Forecasts.
The net employment forecast (the difference between the percentage of employers who predict an increase in staff and those who predict a decrease) in the second quarter is +10%, which is relatively stable compared with both the first three months and the last three months of last year.
Sources: Mediafax.ro, Profit.ro
Exchange of fiscal information
On Tuesday, EU Ministers of Finance approved the project of an EU Directive on automatic exchange of information connected to major companies between the tax administrations of the different European countries, reports AFP quoted by Hotnews. This Directive is the first step in a plan presented on 28 January, which will combat the aggressive tax optimisation practised by multinationals. The project is part of the plan conceived by the OCDE, an organisation that brings together thirty developed countries, known as BEPS (Base Erosion and Profit Shifting).
The owners of the immovable properties where Companies and Authorised Freelance Individuals (PFAs) have their premises will pay the tax on buildings as for residential spaces if the tenants do not deduct utilities expenses.
In a special session on Friday, the Government passed a modification to the norms of the Fiscal Code, whereby the tax on buildings used for both residential and non-residential purposes will be similar to that applied to homes if the business and living spaces are not delimited by contract and if utilities expenses are not deducted. The condition regarding the deduction of utilities expenses applies in the case of buildings where the living and business spaces are not delimited according to contractual stipulations for ownership of the space. In the case in which the spaces are separate, for example if in the rental or commodatum contract a space is stipulated for the premises of the company or authorised individual, then an evaluation report for the entire building is required. The tax will be calculated the same as for residential buildings for the living spaces and the same as for non-residential buildings, according to the pro rata, for those used for business. The two values are added together.
The government has adopted an emergency ordinance regarding telephone tapping. The Public Ministry, Anti-Corruption Department (DNA) and Organised Crime and Terrorism Department will each have forty judicial policemen
According to a communiqué issued by the Government and quoted by România Liberă, the Emergency Ordinance stipulates that prosecutors and criminal investigators will be the only people allowed to carry out electronic surveillance in criminal cases, employing directly and independently the infrastructure of the Romanian Intelligence Service (SRI). The ordinance passed on Friday puts in place an emergency solution in order to ensure the continuity of investigations, including cases involving international judicial co-operation. Public electronic communications networks and public suppliers of electronic communications of any type and of financial services are required to collaborate with prosecutors, criminal investigators and specialist police personnel, within the limits of their competence, when electronic surveillance warrants are served. Special criminal investigators, according to a separate modification, will be able, in cases involving terrorism and crimes against national security, to execute electronic surveillance warrants.
Likewise, a modification to Law no. 304/2004 regarding the Organisation of the Judiciary, has introduced a stipulation according to which the president of the High Court of Cassation and Justice or any judge he might assign will verify on a quarterly basis or whenever the need arises the manner in which electronic surveillance is carried out by criminal investigators within the framework of the National Centre for Interception of Communications. The Public Ministry is authorised to hold and employ adequate means to obtain, verify, process, store and discover information regarding crimes under investigation, in conformity with the law (taking into account the existence of previous stipulations for the DNA and DIICOT to this effect).
Change in the law for mothers
Mothers will be able to stay at home for two years and receive 85% of their wage. The ceiling of 3,400 lei has been eliminated. On Tuesday, the Labour Commission of the Chamber of Deputies passed a draft law to eliminate the upper ceiling for monthly child-rearing allowances, which hitherto had been set at 3,400 lei. The allowance will be granted until the child reaches the age of two. Those who have over the course of two years earned a minimum of twelve months of taxable income will benefit from two-year child-rearing leave, three years in the case of handicapped children. The deputies from the Labour Commission likewise decided that the monthly child-rearing allowance will be 85% of the average net income earned over the last twelve months worked in the two years prior to the date of the child’s birth. The minimum allowance may not be less than 85% of the national minimum wage. As well as the 3,400 upper ceiling, the option for mothers to choose to stay at home either one or two years has also been eliminated: all mothers may stay at home until their children reach the age of two.
Sources: Economica.net, Hotnews.ro, Profit.ro, România Liberă