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Romania’s recent economic and political achievements have prompted all international rating agencies to upgrade the country’s ratings.
In September 2005, Standard & Poor’s raised Romania’s long-term foreign currency rating to investment grade at BBB– (‘BBB minus’) with stable outlook. At the end of 2005, Fitch affirmed the country’s long-term foreign currency at BBB– (‘BBB minus’). Also, the US financial rating agency Moody’s upgraded the Romanian government long-term and short-term foreign and local currency ratings to Baa3 in October 2006. These changes contributed to an improvement in Romania’s position on foreign capital markets.
The latest data on GDP growth indicates a 7.4% increase for the first semester of 2006 as opposed to the same period in 2005. The Government expected a GDP growth of around 6.7% in 2006.
The large privatizations that took place in 2005 (e.g. the sale of two major electricity distribution companies: Electrica Oltenia and Electrica Moldova to Ceske Energeticke Zavody (CEZ), and E.ON AG), the introduction of the new Fiscal Code and also the country’s EU accession process, positively influenced the level of FDI.
Meanwhile, the National Bank of Romania (BNR) hard currency reserves, excluding some 104.8 tones of gold, rose to EUR 16.7 billion at the end of December 2005 from EUR 10.8 billion the previous year. At the end of September 2006, total reserves were around EUR 20 billion.
The Monitoring Report of the European Commission released in September 2006 acknowledged progress made by Romania with regard to macroeconomic stabilization and economic reform.
Further progress has been acknowledged in reforming the justice system as well as in the fight against corruption.
Romania's achievements have also been recognized by the rating agencies with Moody’s upgrading Romania’s long-term and short-term foreign and local currency ratings to Baa3 with a stable outlook in October 2006 while one year ago, S&P raised Romania's long-term foreign currency credit rating to investment grade at 'BBB-', with stable outlook.
The new government moved fast to modify the fiscal code with the aim of bringing it into line with EU requirements and to provide an atmosphere of business stability and predictability in Romania.
The new code that came into force on 1 January 2007 maintains the single flat tax rate of 16% and VAT remains at 19%.
The code also stipulates that micro-companies pay a 2% tax on revenues earned in 2007, 2.5% on revenues for 2008 and 3% on revenues for 2009.
Capital gain for sale of shares is taxed at 1% for long-term holdings (more than one year) and 16% for short-term holdings (less than one year).
The privatization process continues with large-scale sell-offs slated to take place in the financial sector (i.e. the National Savings Bank-CEC), in the energy sector (i.e. the National Gas Company - Romgaz, three power complexes and three electricity distributors), in post and radio communications (i.e. the Romanian Post, the National Radio communications Company), in the pharmaceutical sector (i.e. Antibiotice Iasi), and in the transport sector (i.e. the Romanian Freight Railway Transport-CFR Marfa).
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Overview
