- Title: Romania gears up for tax cuts in 2018, eyes robust economic growth
- Date: 26th May 2017
- Summary: BUCHAREST, ROMANIA (MAY 26, 2017) (REUTERS) ENTRANCE TO ROMANIAN FINANCE MINISTRY SIGN READING (Romanian) "ROMANIAN FINANCE MINISTRY" ROMANIAN FINANCE MINISTER VIOREL STEFAN IN HIS OFFICE ROMANIAN AND EU FLAGS BEHIND MINISTER (SOUNDBITE) (Romanian) ROMANIAN FINANCE MINISTER, VIOREL STEFAN, SAYING: "We will certainly introduce from January 2018 the fiscal relaxation measures mentioned in the governing programme." ROMANIAN COAT OF ARMS (SOUNDBITE) (Romanian) ROMANIAN FINANCE MINISTER, VIOREL STEFAN, SAYING: "We are talking about convergence criteria and joining the euro, but we forget that this doesn't mean just meeting nominal criteria, it also means that our everyday lives, our economy capacity must converge with to that of the EU. So, we need to invest and raise household income. We cannot imagine converging with the EU if the population's income is not at least half of the income of the EU's population. We are not convergent without an infrastructure compatible with the European and we cannot say we will be convergent with Europe if only some regions are. All the regions in the country have to reach the European level." BOOKS ON SHELF (SOUNDBITE) (Romanian) ROMANIAN FINANCE MINISTER, VIOREL STEFAN, SAYING: "The pace of growth in the first quarter is generally slower than the other quarters. So, that's why the first quarter level makes us and the business environment optimistic. We should look at the bourse's performance. It is the best indicative, it is visible that the business environment is trusting Romanian economy, it is trusting public policies. We think that the National Forecast Commission figures will be very cautious and the (economic) growth (for the full year) will be higher than 5.2 percent." FOLDERS ON SHELF
- Embargoed: 9th June 2017 18:04
- Keywords: wage hikes tax cuts Finance Minister Viorel Stefan Romania CEE Summit
- Location: BUCHAREST, ROMANIA
- City: BUCHAREST, ROMANIA
- Country: Romania
- Topics: Budget/Taxation/Revenue,Government/Politics
- Reuters ID: LVA0016IH7IUX
- Aspect Ratio: 16:9
- Story Text:Romania will meet its budget deficit target of 3.0 percent of gross domestic product this year with its economy possibly outpacing a 5.2 percent official growth forecast, spurred by wage hikes and tax cuts, the finance minister said on Friday (May 26).
The ruling Social Democrats plan to continue a wide fiscal relaxation scheme next year that has raised concerns with the European Commission and the IMF.
"We will certainly introduce from January 2018 the fiscal relaxation measures mentioned in the governing programme," Finance Minister Viorel Stefan said in an interview for the Reuters Central & Eastern Europe Investment Summit.
Stefan said the government aimed to cut the number of social security contributions from nine to just two next year, for pensions and healthcare, which will total 35 percent. Currently, the nine levies total 39.25 percent and are jointly paid by employers and their workforce.
From next year, employers will no longer need to pay social security contributions on their employees' behalf, with the task transferred entirely to employees.
Parliament is on the brink of approving a multi-year public sector wage bill, which would more than double healthcare workers' gross wages, boost education pay by 50 percent and other public salaries by lower double digits.
The European Commission estimates Romania will run the EU's largest deficit this year and next at 3.5 percent and 3.7 percent of GDP, respectively.
Stefan said the EU and IMF did not take into account the impact of fiscal stimulus, which will boost the taxation pool and generate higher revenue, including about 100,000 new jobs created since the start of the year.
He also said Bucharest plans to run large structural deficits until 2019 to help the EU's second-poorest state catch up to Western peers.
"We are talking about convergence and joining the euro, but we forget that these don't mean just meeting nominal criteria, but also mean investment, raising household income, infrastructure that is compatible with the European one and regions in the country that are equal in development."
Romania's gross monthly average wage is a little over 700 euros ($786), compared with the EU average of 2,370 euros.
The country spends just under 20 percent of GDP on state wages, pensions and social assistance. Public investment is persistently low, with 40 percent of roads made of gravel and decades old hospitals.
Romania was the bloc's fastest-growing economy in January-March, expanding 5.7 percent thanks to a consumption boom, and its budget ran a small surplus at the end of April.
Stefan said the budget could run a surplus at the end of the first half, which would mean its 3 percent deficit target for the full year would certainly be met.
"The pace of growth in the first quarter is generally slower than the other quarters. So the figure ... makes us optimistic that economic growth for the full year will be higher than 5.2 percent."
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