The economy is panting and there is no room for tax hikes this year or in the foreseeable future because the shock will be passed on and the economy will go into recession, Iulian Lolea, macroeconomist at the Concordia Employers' Confederation, told a specialized event on Tuesday.
„A number of the recommendations that they (OECD, editor's note) have may or may not be implemented. A number of them look in the area of tax increases, but we in Romania, in the private sector, have felt it very strongly recently. We come after two years of continuous tax hikes and the economy is showing very clearly that it can't go on. The economy is panting and we say it loud and clear, there is no room for tax hikes this year or in the foreseeable future, because we will pass on the shock and the economy will go into a recession that will be hard for everyone to bear”, said Iulian Lolea, present at the strategic dialogue event „From Stabilization to Growth: Balancing Macro-Fiscal Discipline with Productive Relaunch”, organized by the Ministry of Finance in partnership with the Organization for Economic Cooperation and Development, according to Agerpres.
Asked about solutions to keep fuel prices under control, he said any economist would say that capping, especially for fuel, makes no sense.
„It won't get you anywhere good, you'll run out of fuel or you'll have problems. But what can be done? You can give one-off support in the form of reduced excise duties, as is happening now for hauliers. You can make such calculations, but here the government can know better the fiscal space it has. As we have always said, we must be fiscally responsible and try not to be caught unprepared by these crises, because they will keep coming. This time they have caught us completely unprepared, just as in previous crises. We have no fiscal space to help anyone”said Iulian Lolea.
In its Economic Survey on Romania, conducted by the OECD, the organization warns that the country's public finances have deteriorated significantly, which poses risks to the long-term sustainability of public finances, and to avoid this the OECD says that it is necessary to increase the efficiency of public spending, as well as broadening the tax base and improving tax compliance.
The paper also sees the recent pension reform, in particular by raising the retirement age for women, limiting special pensions and introducing new indexation rules, as a positive step towards improving the sustainability of the pension system and encouraging labor force participation. At the same time, Romania faces growing pressure to increase spending on health, education, social care and innovation to support inclusive growth. Public sector wages also account for a growing share of government spending, which requires tighter control.