major macro economic indicators
|GDP growth (%)||3.0||3.8||4,6||3,6|
|Inflation (yearly average) (%)||1.4||-0.4||-0.5||1.8|
|Budget balance (% GDP)||-0.8||-0.8||-2.9||-3.0|
|Current account balance (% GDP)||0.0||-1.1||-2.7||-2.4|
|Public debt (% GDP)||39.4||38.0||39.5||40.5|
- Large home market
- Significant agricultural potential: wheat, barley, colza, etc.
- Limited energy dependence (23%) thanks to coal, oil, gas and uranium
- Large-scale renewable electricity production (37%)
- Diversified and competitive industry thanks to cheap labour
- Leu stable against euro
- Demographic decline: low birth-rate and emigration of educated youth
- Serious regional disparities in terms of education, vocational training, healthcare and transport, rural regions lag behind
- Low participation rate for Hungarian and Roma minorities, young people and women in the economy
- Large informal economy (28%)
- Inefficient agricultural sector (11% of GDP)
- Slow bureaucratic and legal processes, corruption
- Weak public revenues and tax evasion
Lively but slowing domestic demand
Without returning to its high level of 2016, growth should remain strong in 2017. As previously, the main driver is domestic demand. Household consumption (70% of GDP) will be the leading element. Once again, households will benefit from employment increases, wages and pensions rise—both in the private and public sectors—and from taxes fall (remains to be defined). Wages are being driven by the increasing scarcity of labour as a result of emigration and the ageing of the population, despite the financial incentives being used to encourage mobility among the unemployed and reduce long-term unemployment. Consumption will however slow sharply because of the declining impact of the tax cuts and the return of inflation, connected with the overloading of existing production capacities.
Investment (24% of GDP) will continue at a strong level against a background of low interest rates and the positive outlook for growth. It will be sustained in construction, telecommunications and computing. Investment aid (0.52% of GDP) will be available to the SME sector. Despite the poor level of take up because of the bureaucracy involved and administrative shortcomings at the local level, European funds will contribute in maintaining the moderate growth in public investment, but still not enough to make up for the infrastructure inadequacies. The State will continue to guarantee half of loans taken out by first time buyers with the aim of encouraging lending and lowering the cost. However, there is one unknown that arises from the application of the Datio in solutum law approved in April 2016 that allows the borrowers to discharge their commitment by transferring the ownership of their house to the creditor, and the inhibitive effect that this could have on the supply of credit. This comes on top of the cost for the banks (530 million euros according to the Central Bank, or 4.2% of outstanding credit) of converting the lei at the rate of exchange at the time of the signing of household loans denominated in Swiss francs (law of October 2016). The cost will rise considerably if it is extended to loans in euros (more than half of outstanding credit). The Constitutional Court, examining the law, is likely to amend the application. With substantial non-performing loans (10% in October 2016), but with a gradual reduction in these, and the laborious application of securities, prudence will remain the key for the banks, 90% subsidiaries of Austrian, Dutch, French and Greek groups. They will continue to repay their debts to the parent companies, whilst building up a domestic deposits base.
Exports (39% of GDP) will increase at a reasonable rate, but below that of imports under the impetus of domestic demand, and the contribution from trade will remain negative. Sales of cars (DACIA and Ford) and tyres (a quarter of exports), together with wood, fertilizers, metals, medicines, machines and clothing will feel the benefits of any increase in European demand. Exports of cereals and oil crops will depend on the harvest.
Public accounts and external accounts shaken up
The relaxing of budget policy triggered a deepening in the public deficit and a slight increase in the debt. At the beginning of 2017, VAT will be further reduced, from 20% to 19%. The single income tax rate will be reduced from 16% to 14%, creating pressure on public revenues (32% of GDP) that are already too small to rectify the structural problems. Parliament also voted to remove 102 charges (0.2% of GDP), but this is now before the Constitutional Court for non-conformity with the law on budget responsibility. At the end its term of office he began examining proposals to increase pensions (3% of GDP) and reduce social contributions by 5% (1.3% of GDP). Whilst defence spending will increase from 1.5 to 2% of GDP, with the fight against tax evasion and the restructuring of the public sector reaching their limits, it is unlikely that these measures will be approved by the newly elected Parliament, or at least not all of them. The government will strive to ensure that the 3% deficit threshold is not exceeded, by cutting investment spending if necessary, so as not to come within the scope of the European Excessive Deficit Procedure.
The trade and current account deficits, widened in 2016, reflecting the inability of domestic production to satisfy the level of demand. The deficit in the trade in goods exceeded 6% of GDP in 2016, whilst the surplus in services (around 4%) linked with tourism, road transport, IT and computers, and the outward processing of clothing and textiles will have increased. In 2017, the slowdown in consumption is expected to lead to a slight fall in the foreign trade and current account deficits. The income deficit (approx. 2.5%) arising with the repatriation of dividends and interest on the gross external debt (54% of GDP at the end of 2016, with one third for the State) will be almost double the remittances from workers abroad. The current account deficit will continue to be financed by FDI (approximately 2% of GDP net, unless a third car maker unexpectedly moves in) and European Funds (3%).
Social-Democrats retain majority
The December 2016 elections brought to an end the transitional technical government installed in November 2015 following the resignation of the Social-Democrat Prime Minister implicated in a corruption scandal. The Social-Democrats of the SDP won 46% of the votes and a victory over the Liberals, to retain their majority in Parliament. The accommodating budget policies are expected to continue under the new government headed by Sorin Grindeanu, in so far as they comply with the European criteria.
Last update : January 2017
The cheques and the promissory notes are the payment methods most commonly used for domestic and sometimes international transactions. The legal consecration is provided at Law no. 58/1934 regarding the bill of exchange and the promissory note modified and completed by the G.O. no. 11/1993, as well as the G.O.E. no. 39/2008.
The professionals choose to use the cheque /promissory note as a payment method of the equivalent value of purchased and received goods, works and services. The owner (beneficiary) of the cheque/promissory note must only give it to the bank and cash-in the amount written on that note.
Payment instruments also can be endorsed, if debtor does not have the possibility to pay.
An additional safety measure for the creditors is the request of cheque/promissory notes guaranteed by the administrator of the debtor company. In the case of execution of the promissory note that was not cleared, the creditor shall also take action against the administrator, who shall be liable for the debt with his/her own assets. The cheque, as well as the promissory note, is enforceable title and, if it is not cleared due to the absence of cash, the proceedings of forced execution may be started against the bad payer debtor based on them.
Cheques – moreover the promissory notes - allow creditors to exert substantial pressure on debtors since an unpaid cheque not only gives access to forced execution, but also constitutes a criminal offence.
Finally, bank transfers are becoming the most common payment method with the main Romanian banks, now linked to the SWIFT electronic network, which provides low-cost, flexible, and rapid processing of domestic and international payments.
DIFFERENT TYPES OF LEGAL PROCEDURES FOR THE DEBT RECOVERY, ACCORDING TO THE ROMANIAN LEGISLATION
The legislative consecration of this special procedure is provided at art. 1013-1024 NCPC. This procedure applies to the certain liquid and exigible debts with an amount exceeding RON 10.001, resulting from a civil contract, including the ones concluded between a professional and a contracting authority, excepting the debts registered in statement of affairs, within an insolvency procedure.
The dispositions of art. 1014 of the New Civil Procedure Code instate the obligation to run a preliminary procedure, obligation that is incumbent on the creditor, through the transmission of a summoning to the debtor through the bailiff or through a registered letter, with declarative content and confirmation receipt, by which the debtor will be summoned to pay the due amount within 15 days since receipt.
According to art. 1024 of the Civil Procedure Code, the ordinance is enforceable even if a request for cancellation is brought against it, and the interested party may raise an appeal against enforcement, according to the common law.
REDUCED VALUE CLAIMS
The legal consecration of this special procedure is provided at art. 1025-1032 NCPC. This procedure was created as an alternative to the common law proceedings and to the ordinance procedure for a quick resolution of the patrimony litigations, when the value of the object thereof does not exceed RON 10.000 and does not refer to the matters excepted by the law (art. 1025, par. 2 and 3 NCPC).
The procedure implies the use of some standard forms, approved by the Order of the Minister of Justice, i.e. the request form (art. 1028 par. 2 NCPC), the form for the completion and/or rectification of the request form (art. 1028 par. 4 NCPC) and the response form (art. 1029 par. 4 NCPC). The Romanian legislator mentions expressly that only documents can be means of evidence.
According to art. 1032 par. 1 “the decision of the Court is only submitted to appeal, within 30 days as of the communication”; the solution corresponds to the one of the common law, except for the requests related to debts whose object is the payment of an amount of maximum RON 2000 (included) and which must be treated “firstly and lastly” by the court (art. 94 point 2 NCPC). By way of derogation from the common law however (art. 468 par. 5 NCPC), the exercise of the appeal does not suspend the enforcement procedure.
COMMON LAW PROCEDURE
The common law procedure resolves the patrimony litigations. The verification and settlement of the petition in Court detailed in the aforementioned procedure will also apply to this procedure.
The judge orders the communication of the request to the defendant, and the latter must submit a statement of defense within 25 days as of the communication of the petition. The plaintiff is bound to submit in his turn an answer to the statement of defense within 10 days since the communication, while the defendant will acknowledge the answer from the affair file. Within 3 days since the date of submission of the answer to the statement of defense, the court establishes the first trial date which will be within maximum 60 days, disposing the summoning of the parties. This process is a longer one, knowing that other evidence is also administered along with the documents – accounting expertise, parties’ cross-examination, the witness hearing. Following the debates, the court renders a legal decision. The ordinary remedy at law is the appeal within 30 days since the communication of the decision, to the upper court, and the extraordinary remedies at law are the appeal, the appeal for annulment and the revision. The appeal may be promoted for pecuniary requests with a value exceeding RON 500.001. The judicial stamp fee has a variable amount depending on the debt value.
THE ENFORCEMENT PROCEDURE
According to the civil procedure Code the enforcement procedure is a legal method to recover debts that have been established by enforceable titles such as decisions / sentences of the courts of law, notary contracts for goods or money, bank loans, payment instruments, etc.The enforcement procedure starts at the request of a creditor and is fulfilled by a bailiff.
Law number 85/2014 sets two mandatory conditions, which need to be cumulatively fulfilled in order for the creditors to be able to start the insolvency procedure against their debtors:
(i) the creditor has a certain, liquid and outstanding debt against the debtor for more than 60 days;
(ii) the debt must exceed the amount of RON 40.000.
The procedure will begin with a petition filed in court (Tribunal) by the debtor himself or by creditor.
Law number 85/2014 sets two procedures to be undertaken by debtors who are not able to pay their debts: (i) the judicial reorganization procedure, aiming to rescue the debtor; (ii) the bankruptcy procedure aimed at liquidating debtor’s assets and paying all outstanding debts.
When the procedure is opened against a debtor, the creditors have to lodge their claims in due time. After lodging the claims, the judicial administrator/liquidator will conclude the panel of creditors – secured and unsecured. Unsecured creditors in the insolvency/bankruptcy procedure are those who do not have collateral security against the debtor's assets and who are not accompanied by liens privileges. The unsecured creditors generally did not recover their receivables, only in reorganization procedure they can recover their debts. The secured creditors have the legal possibility to recover their debts through the enforcement of those guarantees.
From the date of the procedure’s opening, all the judicial actions, extrajudicial actions or measures of enforcement procedure for the claims’ recovery on the debtor or his goods, will be suspended de jure.
Liability of the debtor’s management may be engaged in case the debtor’s administrators or auditors or other persons fraudulently determined the debtor’s insolvency.
Beginning with the date when court pronounces the bankruptcy of the debtor and the procedure is closed, according to Fiscal Code, the creditor has the possibility to reduce his loss by deducting income tax and VAT.