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Business community calls for responsible law-making

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Nearly six months into 2018, and there is still a certain degree of apprehension in the local business community, as legislative unpredictability continues to undermine business confidence. A key issue has been the authorities' alleged plans to change the three-pillar pension system. Both the Foreign Investors Council (FIC) and AmCham have publicly expressed concern that possible measures to alter the current system could have a negative impact on employees' retirement prospects and destabilize Romania's financial market.
AmCham noted that “a long-term sustainable social insurance system in Romania is not merely an objective, but a necessity, and the Private Pensions Pillar II represents a reliable income source, complementing the public pension, as the purpose of such financial instrument is exclusively to accumulate savings for the retirement age.”
It added: “The success of the state and corporate IPOs in Romania is largely due to the private pensions funds. Over seven million Romanians have accumulated savings amounting to approximately nine billion euros through the Private Pensions Pillar II in the first 10 years of the system’s functioning, 15 percent of this amount representing the benefits of the investments placed by the private pensions administrators.”
AmCham also called for an end to “political measures that sacrifice long-term objectives, in this case, the wealth of the future generations of retirees, to compensate short term budgetary needs. The additional revenues to the public social insurances budget through a potential cancellation of the private pensions’ contributions, will in fact have significant negative consequences.”
In turn, the FIC pointed out that the money saved in Pillar 2 “are not only a form of insurance for the future but there is also an important source of funding for today’s economy.” It added: “The Romanian Government and Romanian companies use this money to fund their expansion and development. The Romania capital market would suffer terribly by the absence of Pillar 2.”
Meanwhile, Garanti Bank has increased its forecast regarding Romania’s GDP 2018 growth, to 4.4 percent, from four percent estimated at the end of last year. Its latest Quarterly Macroeconomic Report notes that, just like in the previous year, the economic advance will likely be supported by services, industry and trade.
“Domestic demand continues to be stimulated by the expansive fiscal policy, as the budget deficit is seen at 3.5 percent in 2018. External demand for capital goods needed in production or for durables continues to grow, a path seen in 2017 as well, as the capital stock is being renewed, after having been eroded in the post crisis years,” Garanti Bank pointed out in a press release. As for inflation, the bank forecasts it at a year-end level of around 3.6 percent, down from the current 5.2 percent level.
The bank also mentions that the central bank (BNR) has raised the key policy rate three times this year, to 2.5 percent, “and started to sterilize excess liquidity in April,” as the economy was showing signs of overheating. “We expect inflation to stabilize after the peak reached in the first half of 2018, so, further on, we see just one more rate hike by the end of the year, to 2.75 percent from the current 2.5 percent.”
On the current account deficit front, the bank expects a further widening, albeit at a slower pace, “as consumption appetite seems to moderate and wages’ growth should be slower in 2018.” The year-end leu/euro exchange rate is seen at 4.78 lei/euro.  
In the meantime, Business Arena will continue to keep an eye on all the issues affecting the business community, reflecting its views, hopes and challenges.

The is also available in our print edition of Business Arena.

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