Erste analysts say that the fiscal easing measures announced by the previous government remain a risk for 2016.
Under the new tax code, Romania will cut its value added tax rate from the current level of 24% to 20% as of January next year and further to 19% as of 2017. It also eliminates a tax on special constructions and an extra charge on fuel excises as of 2017. The value-added tax on food was also cut to 9% from 24% starting June.
“From this point of view, we see the government change as a plus, but do not expect overnight miracles. At the end of the day, most of the fiscal decisions should be validated by the same Parliament,” Erste Group said in the report.
In terms of the impact on the financial market, Erste Group expects the recent depreciation of the RON to 4.46, its weakest level in four months, to be short-lived. The appointment by the Parliament of a new government would be a return to normality and this should be reflected by the forex market as well. Any signs of a more prudent fiscal policy would be supportive for sovereign yields, while fundamentals of Romania remain strong, Erste said.
Erste analysts do not expect any surprises in the Parliament, with an ad-hoc majority already formed to support the new government, which is favorable for the continuation of reforms and the fight against corruption.
However, the new PM Dacian Ciolos is expected to negotiate with the main political parties a governing agenda including the priorities for the next year until elections.
Romanian President Klaus Iohannis on Tuesday nominated former EU Commissioner Dacian Ciolos for prime minister, after Victor Ponta stepped down last week amid ample street protests.
According to the Constitution, Ciolos, a technocrat PM, should obtain the confidence vote of the Parliament for the new government within the next ten days.