Fondul Proprietatea estimates that 2019 will bring along a decrease in private consumption growth, moderate inflation, low unemployment, as well as upward pressure on interest rates.

“Romania’s growth was heading towards a moderate slow-down in 2019 compared to 2018 even before the adoption of Government Emergency Ordinance (GEO) 114/2018 at the end of December, which has forced us to reconsider our expectations,” says Johan Meyer, CEO Franklin Templeton Investments Bucharest Branch and Portfolio Manager of Fondul Proprietatea. “We believe the economic deceleration could be even more pronounced, on the other, more accurate predictions are hampered by the uncertainty and lack of impact studies for the measures introduced. Nonetheless, we believe the measures introduced could have dire and far-reaching effects, including for the capital market.”

FP’s expectations regarding the energy sector have changed following the adoption of GEO 114/2018.

“While we had initially been quite optimistic regarding its potential for job creation and contribution to State revenues on the long-term, the capping of gas and energy prices and new taxation regime, but also potentially put the country’s energy independence at severe risk,” says Meyer.

“The banking sector has been hit hard, too. The recently introduced tax on bank might backfire, creating a snowball effect for the entire economy, especially on the background of growing macroeconomic imbalances which call for prudent, market-friendly fiscal policies. In fact, with such a measure, Romania inexplicably inflicts pain on itself and it is regular citizens who will probably have to pick up the bill eventually,” he adds.

FP urges Romania to foster an environment where companies are confident to invest in businesses on the long-term, so that they continue generating income for the State in a sustainable way though dividends and taxes on profits.