X-Trade Brokers Romania said the public sector wage cuts and retirement benefits cut would lower consumption by more than expected, on induced psychological effects.
“It is a far-fetched assumption to think that the government’s austerity measures to narrow budget gap would feed into the state budget the expected amounts, as it could spill over the already rock-bottom consumption. And this would result in an increase in bankruptcies, and jobless claims in the private sector, as well as in a drop in collected VAT”, said Victor Safta (photo), chief executive of X-Trade Brokers Romania.
He added that investment will be discouraged, both due to the aforementioned reasons and as it forces companies to take a wait-and-see approach on lack of visibility in terms of legislation and tax regime.
“Furthermore, any kind of instability – political, social or regulatory – is the no. 1 threat at this point, and throws the country back to years-ago levels”, said Safta.
X-Trade Brokers Romania forecasts a high volatility on all markets, including the national currency.
“The leu has already reacted to the recently announced measures, and to their ‘echoes’ accordingly: last week, on X-Trade Brokers platform, the national currency recorded a variation of 2.34% between the highs and troughs of the period. By contrast, in the first four months last year, the leu had a maximum variation of 4.89%. We expect the leu to remain highly volatile in the coming period”, said the head of XTB Romania.
