Ponta wants to make history with his budget

Victor Ponta yesterday announced that this year Romania will have a bigger GDP than in 2008, after the National Statistics Institute announced an economic growth rate of 2.7%, in the first nine months of 2013.

"We have finally reached the point we were at in 2008. In 2014 we will have the biggest GDP since the revolution", the prime-minister said.

According to the budget approved yesterday, in 2014 the economy will reach 148 billion Euros, and this year we will have a GDP of 140.5 billion Euros, compared to 139.8 billion Euros - the value of the GDP recorded in 2008.

The Prime-Minister said that this positive trend is fueled by agriculture, and especially industry, services and the rate of absorption of EU funds.

Cristian Pârvan, the secretary General of the Romanian Association of Businesspeople (AOAR), thinks that Romania should be glad if the economic growth exceeds 4%.

"With a 2% or 2.2% increase of the GDP, we are just barely crawling along. In 2009, the GDP dropped 7%. We will perhaps reach the nominal GDP of 2008 if we add up the slight increases that we have in 2011 and 2012 and combined with the one in this year, we may recoup the losses of 2009 and 2010", says Cristian Pârvan, who went on to say "that our industry is lagging behind the exports": "What we have is a generalized outsourcing activity, based on what others tell us to do, instead of based on our needs".

As for the weight of agriculture in the GDP, the representative of the AOAR considers that it is not a good thing for our economy.

"Being that heavily reliant on the agriculture, the good results of which depend on whether it rains or not, is not that good", according to Mr. Pârvan.

Victor Ponta announced that this year expenses increased 14 billion lei compared to 2012, 2.6 billion lei in arrears to the healthcare system and 1 billion lei in arrears to the local authorities were paid, the salaries of public sector employees and the minimum wage increased 15%, inflation fell to 1.8% from 4.95% in 2012, and the deficit continued to fall from 3% of the GDP to 2.6% of the GDP.

The tax levels are the lowest in the EU, the prime-minister also says, who stressed that while in Romania the flat tax rate is 16%, in other countries the income tax is as high as 45%".

Nevertheless, Cristian Pârvan says that until people and companies actually feel the effect of these increases in their pockets, the prime-minister should be more cautious and more reserved in presenting some positive numbers.

He said: "We do not dispute these numbers, which have increased compared to the previous years, but let's not forget that consumption has dropped considerably. Even though the GDP increased, this isn't felt by people. Concerning taxation, we don't yet know what gets taxed and what doesn't, we have a chaotic taxation system. The presentation of the Government is intended for the majority of the population. While in other countries the income tax is 45%, that ratio will decrease for people who have two children, who have life insurance, who have a maid for their children. This is where progressive taxation comes in. We want to take 45% of the salary, (ed. note: in taxes), and not to give anything in return".

• 230 billion lei - the budget for 2014

The budget for 2014 amounts to 230 billion lei, according to Victor Ponta, who said that about 50 billion lei are set aside for wages, 52 billion lei will go towards pensions, and 40 billion lei were allocated for investments.

The Ministry of Health received 7.8 billion lei, 2.5 billion more than in 2013, whereas the National Health Insurance Fund (CNAS) will have a budget of 22.6 billion lei, up slightly over 2013.

In the education sector, 300 million Euros from European grants of European grants will be diverted from other programs towards infrastructure works for schools. Also, the salaries of beginner teachers in the pre-university education system (with a maximum of seniority of 6 years) and those of college tutors and assistant professors will increase 10%.

The budget for 2014 stipulates the indexation of the pensions above the inflation rate, as well as salary increases for the high school teachers and resident doctors.

The budget draft for 2014 is considering the cutting of Social Security Contributions, starting in Q2 2014, and keeping the flat tax rate unchanged. The prime-minister said that the Executive is preparing to cut the VAT for other categories of products aside bakery products, for which the VAT will remain at 9%.

The minimum wage will be increased 12.5%, according to the promises stipulated in the budget, and the pensions will be increased 3.76%, while the minimum guaranteed income will be increased 5%.