​In the context of the development of the state budget for 2023, as every year, AmCham Romania signals the importance of following some fundamental principles that should guide this process.

The current macroeconomic outlook is marked by a series of overlapping crises, which calls for effective and balanced fiscal planning. Above the x-ray picture of economic growth in 2022 looms a horizon of uncertainty, culminating in a forecast of recession in benchmark economies such as the US, Germany and other European countries, while the experience of the past two years shows us that we cannot insulate ourselves from exogenous shocks.

According to AmCham, sustainable budget planning should be consistent with strategic principles and goals, such as:

• 1. Changing the economic paradigm becomes zero priority in a context where the growth model based on consumption is not only unhealthy but also vulnerable. The energy price crisis and galloping inflation, the consequences of which are felt mainly at the level of consumption, are eloquent examples, especially since, despite the restrictions on energy prices, the speed of their transmission in the price of goods is unprecedented.

• 2. It is encouraging that Romania registered continuity of investment flows during the pandemic and the post-pandemic period, despite the acceleration of inflation. Strategic investment in value-added activities that will create a multiplier effect in the economy is the key to success for sustainable growth, as well as to address one of Romania’s chronic vulnerabilities, the record trade deficit.

The rapid growth of imports, but especially its location in strategic sectors where Romania has significant potential (agriculture, energy, petrochemicals, etc.), is at least a paradox. Romania is the fifth country in terms of agricultural potential in the EU, but the level of import of agri-food products is alarming. Although our country has significant resources and claims to be “energy independent”, statistics show that we are a net importer of energy.

However, Romania is in a favorable situation to correct these imbalances. Recently, we often hear that Europe is paying for events in Ukraine. On the other hand, the war in Ukraine put the region of Eastern Europe in the “center of attention” and Romania in the foreground, which gave an opportunity to strengthen its regional positions on the eastern flank of NATO and the European Union, but also on the radar of investors.

• 3. Along with the improvement in the absorption of European funds, the acceleration of investments will contribute to both the balancing of the trade balance and the financing of the current account deficit..

The European funds for 2021-2027 are important for the Romanian economy, a massive capital inflow with strict conditions that supports and enables us towards the implementation of reforms and large-scale projects that will support convergence efforts with other economies in the region. The stake of the National Recovery and Resilience Plan (PNRR) extends beyond the horizon of four years remaining for implementation and is a historic chance to put Romania on a path of sustainable development and prosperity.

• 4. Fiscal and budgetary consolidation should remain a priority. Romania’s tax collection indicators are demoralizing not only in relation to the average European level (42% against 27.3% of GDP in Romania), but also in relation to the states in the region (about 35% in Poland and Hungary, respectively 32% in Bulgaria).

The gap is huge, but the solutions are known and AmCham is constantly supporting them in dialogue with the authorities – digitizing fiscal/public administration, reducing the VAT gap and fighting tax evasion, closing tax optimization loopholes that leave room for abuse and restructuring the tax system to a fair one and stimulating basis. The scales shift according to will at the political level. Let’s not forget that we also have a milestone in the PNRR to increase levy as a percentage of GDP!

• 5. Fiscal policy and monetary policy must work in tandem and unite for the common cause of reducing inflation, otherwise it will be prolonged and the costs of overcoming it will increase. It is not possible to maintain a tight monetary policy to respond to a supply shock in parallel with an expansionary fiscal policy that feeds excess demand and implicitly inflationary pressures.

Developing the 2023 budget will be a challenge, but implementation will be an even greater challenge. Against the backdrop of an election year, it is important not to succumb to the temptation of short-term populist measures devoid of economic basis, which may have negative consequences in the medium and long term. Historically, the bill for such “works of art” turned into a bill that we all paid at the level of society.