“Let’s keep our fingers crossed and hope that everything will be fine, although our politicians can be quite resourceful and derail the growth trajectory,” Raiffeisen Bank Chief Economist Jonuts Dumitru told the annual conference of banking financial analysts.

“Looking at our economy, maybe we are more optimistic, but we see it growing by 2.6% this year, although we see risks in both the political and economic spheres,” said Florian Libocore, BRD’s chief economist .

Raiffeisen Bank sees an optimistic growth rate of 3% in 2023. “This is if you ignore the growing political risk”

Regarding the indicators of the real economy in recent years, Ionuc Dumitru says that Romania has proved to be quite resilient to the various and numerous shocks that have tested us. “In 2020, we had a sharp contraction at the beginning of the year when the economy was closed, at least partially, and then economic activity recovered quite quickly. Let’s keep our fingers crossed and hope it continues to be good, although our politicians can be quite resourceful and derail our growth trajectory,” he explains.

Raiffeisen Bank estimates an optimistic growth rate of 3% for 2023 and an acceleration in 2024. “This is if we ignore the growing political risk,” Dumitru also said.

“We had a very large budget deficit in the first quarter of this year, although the government actually intends to reduce it. We believe that the pressure on the budget will intensify, if at least we look at the social pressure. The fiscal consolidation plan seems extremely ambitious, and we share the view of the Fiscal Council, which says that the budget was built on unrealistic revenue assumptions,” Dumitru explains.

In his opinion, the Government is planning an unrealistic fiscal consolidation this year due to increased revenues. “And next year, in order to achieve a deficit below 3% of GDP, the government intends to achieve fiscal consolidation, mainly in terms of spending, which is again unrealistic,” says Ionuc Dumitru.

Basically, the deficit targets for 2023 and 2024 are under threat, he concludes.

The main problems of the budget are both in the expenditure and revenue parts. Basically, on the revenue side of the budget, we still have a huge problem with tax collection. As for costs, we have very tight costs. Almost 90% of tax revenues are wages and social transfers, which is not stable at all, according to the chief economist of Raiffeisen Bank.

“Something would have to happen in the coming years to reach the 3% deficit target. Currently, there is only a huge risk of missing this goal,” says Ionuc Dumitru.

Libokor: We see risks in both the political and economic spheres

Looking at our economy, maybe we are more optimistic, but we see it growing by 2.6% this year, although we see risks in both the political and economic spheres, said Florian Libokor, BRD’s chief economist, at the same conference .

In the field of external balance, we have to discuss the type of trade that we do, says Libokor. “First of all, we have to discuss diversification, new markets, new products, technologies. I believe that we must discuss this, especially since we have not done it before. We have a very strong trade relationship with the EU. This is obvious and normal. From 75% to 80% of our trade is in EU markets. But at the same time, we are trapped in this relationship. And it is very nice to hear some voices saying that nothing will happen in Romania if something happens in Germany, for example. This is impossible!” – believes the chief economist of BRR.

We have ambitious goals, but we use the same tools

If we talk about the fiscal position, then the goals are quite ambitious, and the tools are the same. And the challenges remain the same, Libocor explains.

We still collect very little revenue compared to other countries or the EU average. “But this does not prevent us from opening discussions about changing the fiscal philosophy. We intend to adopt that progressive tax regime again. It might be a good idea at some point, but not now.

“The main reason why those who support such a transition is that we are one of the few EU countries that use this unique quota. Which, by the way, is not unique at all. It was never a single quota because of the benefits given to different industries. Why do I think now is not the best time to switch to progressive taxation? Because we are not as developed as other EU countries, countries that use a progressive taxation regime,” Libokor explained.