The significant fiscal relaxation adopted by the former Government won’t be reversed, given the large political support it had, but the new cabinet could come up with a set of measures to contain the damages caused by excessive measures, according to Erste Group analysts, who still think that the fiscal relaxation measures represent a risk for Romania in 2016.

The Government cut the VAT rate on food from 24% to 9% in June and reduced the tax on special buildings. Starting January 2016 the general VAT rate will be cut from 24% to 20% and the tax on dividends will drop from 16% to 5%. New tax cuts should become effective in January 2017.

From this perspective, Erste’s analysts think that the Government change is a positive factor, although this won’t bring any miracles overnight.

“After all, most fiscal decisions need to be validated by the same Parliament,” according to Erste.

The group’s analysts also believe that the recent Romanian leu (RON) depreciation against the euro won’t take long, and that once the new Government gets the Parliament’s vote, things will return to normal.

editor2romania-insider.com