March 29 (SeeNews) - The main challenge facing Romania this year, considering its poor revenue collection, is to maintain budget deficit under 3% of the country's gross domestic product (GDP), Banca Intesa San Paolo said.
"A deficit above 3% will draw criticism from the EU, not without consequences, and that matters because the EU is the biggest source of funding for the Romanian economy," the bank said in a note to investors on Monday.
In 2015 Romania posted a budget deficit of 1.47% of GDP, within the 1.85% threshold set down in the country's fiscal strategy.
According to a report released by Romania's tax authority, ANAF, earlier on Tuesday, revenue collection in 2015 reached 27.9% of GDP, 0.5 percentage points more than in 2014. In nominal terms, ANAF collected 196.8 billion lei ($49.2 billion/43.7 billion euro), 7.8% more than in 2014.
Latest data from EU member states for 2014 show a revenue collection level of 40% of GDP.
Another threat for Romania's economy is its dependence on domestic consumption which is mainly covered by imports, fueling inflation. Currently, inflation is being hidden from public scrutiny thanks to statistical base effects set to wear off in June, the bank commented.
Romania's annual consumer price deflation deepened to a 9-month high of 2.7% in February from 2.1% in January.
Banca Intesa analysts see the national currency, lei, interest rates moving off the lows in 2016. "Romanian central bankers adopted, since early February, a hawkish stance, signaling, at a rhetorical level, that lei interest rates are likely to move higher."
They also warned about the possible effects of the "give-in-payment law", which is expected to pass in the parliament next week. Under the law, which parliament adopted last month, banks can seize from mortgage defaulters only the property for which they were granted a loan but cannot claim any further payments. The law passed in the Senate and is pending a vote in the Chamber of Deputies.
"Lawmakers are pushing for the law to enter into force before year-end, but enforcement of the law is likely to be the biggest headache, mainly for banks, but also for households. Hence, with banks facing increased legal risks, credit creation is likely to be hampered, to say the least, in 2016," the analysts concluded.
(1 euro = 4.4619 Romanian lei)