Taxes and China – Romania’s biggest economic risks

According to Oxford Economics, right now the main risk for the Romanian economy is a strong slowdown of China’s economy, which would delete 2% of the estimated growth of Romania’s GDP.

But no worry. So far, Oxford Economics’ own forecast is for Chinese growth to ‘slow gradually’ over five years from the current 6.9% to as little as 2.9%.

This is in contrast to a ‘unavoidable hard landing’ scenario, labeled by George Soros in January.
‘A China hard landing would have a profound effect on the global economy’, says Jamie Thompson, head of macro scenarios at Oxford Economics. ‘It would weigh heavily on emerging markets, and advanced economies would not be immune.’

Oxford Economics? The venture was founded 1981 as a commercial venture with Oxford University’s business college to provide economic forecasting. Over time, Oxford Economics (250 full-time staff, including 150 professional economists and a contributor network of over 500 economists, analysts and journalists around the world) became one of the world’s foremost independent global advisory firms, providing reports, forecasts and analytical tools on 200 countries and roughly 100 industrial sectors.

The chinese-romanian connections were just recently in the headlines, when CEFC China Energy Company Ltd acquired a majority of 51 percent of KMG International, former Rompetrol Group, to become the second largest player on the Romanian fuel market, behind Petrom.

On the domestic economic front, Romania’s risks are mainly the impact of fiscal easing on the sustainability of state’s finances, then political uncertainty and the still possible Grexit – due to the strong bank connections between Greece and Romania.

Where there is a downside risk, there is also an upside potential. In the case of the Romanian economy, a positive surprise could come in the fight against corruption, which has already led to reducing tax evasion and increasing state revenues.

More about the current state of the romanian economy will be highlighted by the International Monetary Fund (IMF) who visit Bucharest from March 2nd to the 15th.

The IMF delegation headed by Reza Baqir from Pakistan (picture) will review the overall economic developments and policy measures to maintain economic stability, a sustainable external balance and further liberalizing of foreign trade.