The increase in Romanian VAT from 19% to 24% will lead on a short-termed investors' mistrust in the Romanian capital market, marker players told HotNews.ro. Some of them appreciate that despite a negative first reaction, the investors' trust might recover in the future if the measures adopted by the Government target a stable economy.
"Investors are very scared. in such uncertain times and we see that by looking at the huge drops from Friday and today. I see the entire VAT rise issue within the whole context, connected with the need for budget cuts, the failure to pass the governmental proposals through the Constitutional Court, the increase in tax through VAT - which can lead to a higher inflation - therefore longer unfavourable conditions for the economy and uncertainty for investors", Intercapital Invest president Razvan Pasol told Hotnews.ro.
He added that the increase in VAT is going to result in periods of drops and stagnation and through a delayed market re-launch.
In his turn, WBS Romania broker company president Cristian Sima believes it is possible to see foreign investors leaving the Romanian market if the leu was to depreciate after the VAT rise. "In such a situation, prices would be expected to fall, because foreign investors will sell where they own more shares", Sima declared.
According to Vienna Investment Trust head manager Adrian Simionescu, VAT rise brings an additional taxation, which may lead to a higher inflation; a higher inflation forces the Central Bank to increase they key interest; financing will be more costly and stock exchange players will be forced to find alternative finance solutions".
"In the case where they will ask finance from the capital market, it could benefit the market. If they carry on with banking finance, the costs could be slightly higher" Simionescu indicated.
