Minister Constantin Nita Sees Crisis End Next Year

While in Brasov yesterday, Minister of Small- and Medium-Sized Enterprises Constantin Nita said he expected the ongoing economic crisis in Romania to end in the second half of 2010. "We will incur an economic recession of approximately 8% in 2009. The recession will continue, I believe, in the first half of 2010 and come to an end in the second half of 2010, when we expect an economic growth of 0.2-0.5%," he said.

He thereby contradicted Prime Minister Emil Boc, who had said late last week that the Romanian economy would start recovering in the final months of 2009. In his opinion, this forecast depends only on maintaining the pace and volume of investments in infrastructure.

"I do not intend to contradict anyone, but this is my opinion and this is what is written in the Memorandum signed with the IMF," Nita continued. He explained he was very concerned with the fact that approximately 100,000 small- and medium-sized enterprises had suspended their operations and therefore had stopped contributing to the State budgets. Referring to the causes of the disaster, he hinted at the decision of the co-ruling Democrat-Liberal Party (PD-L) to introduce a minimum tax for all companies, linked to their turnover and not their profit.

"We do not know yet how many of them (i.e. SMEs) closed because of the minimum tax, and how many because of the low demand on the market and how many because of the lending gridlock. What we do know is that the closure of 100,000 companies has caused the loss of a tremendous number of jobs and substantial revenue to the State," Minister Nita explained.

He recalled that the Social Democrats and the Democrat Liberals had worked on a number of measures designed to expedite economic recovery and that one of them included the cancellation of the minimum tax on turnover as of 1 January 2010. Such tax would be replaced by a lump sum tax for specific types of business and be accompanied by a tax exemption for re-invested profit and job creation. He described the said package of measures as likely to stimulate the business environment.