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Uncertainty is the name of the game

Economic growth increased to 0.9% in the second quarter of 2023 from 0.5% in the previous three months, central bank (BNR) data revealed after its latest board meeting. However, the BNR specified that in annual terms the GDP growth continued to decrease more than expected in the second quarter, reaching 1.1%, from 2.4% in the first three months of the year.
 "The decline was driven this time round by household consumption, whereas gross fixed capital formation saw a slight re-acceleration in its double-digit annual growth, and net exports exerted a larger expansionary impact, given the widening of the positive differential between the dynamics of exports of goods and services, in terms of volume, and those of imports. Against this background, trade deficit and current account deficit continued to narrow substan­tially in 2023 Q2 versus 2022 Q2."
At the same time, the inflation slowed down to 9.43% in August from 10.25% in June, and the BNR pointed out that there were significant uncertainties regarding inflation trends in the coming year. The risks are seen to be related to "the configuration of the package of fiscal and budgetary measures envisaged to be implemented for furthering budget consoli­da­tion, as well as from the future fiscal and income policy stance, conducive to inflationary effects in the short run, yet to stronger underlying disinflationary pressures on the longer horizon."  
In a separate development, commenting on the fiscal changes aimed at increasing tax collection and bringing down Romania's budget deficit, the Foreign Investors Council emphasized that the state budget would continue to be fragile "in the absence of major changes in managing the public finances, the reduction of expenses with the administration of public services, the improvement of collec­tion, the assurance of fiscal equity and the reduction of grey zones, the sustainability of the state budget remains fragile." An FIC press release also indicated that "the disproportionate taxation of large taxpayers is threatening the ability of the economy to recover, with the risk that some companies will no longer be able to continue their activity in our country because they will lose their profitability or migrate some activities to other EU countries."
On a different but equally important subject, a PwC Romania analysis for AmCham Romania looked at labor market trends, aiming to identify ways to reduce labor shortages. Presenting the objectives of this analysis, AmCham Romania Vice-President Elisabeta Moraru pointed out that "while we cannot reverse or control digital transformation, the green transition, or the geo­po­litical context, investments, and reforms in critical systems - education, health, infras­tructure, and administration - can reduce brain drain, school dropout rates, disparities between regions, inactive population rates,  and similar aspects that put pressure on the labor market to alarming levels."
Reviewing the systemic causes of the cur­rent labor shortages, Alex Milcev, Member of the AmCham Romania Board of Directors and Chair of the AmCham Labor Market Committee, said: "Without major investments that reduce Romania's gap compared to the European ave­rage in everything that determines the quality of life and public services, without a serious and impactful integration of the lifelong learning concept, it will be impossible to ensure a quality human capital and the skills necessary for an economy and society that are in a rapidly transforming process."

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