The report covers info as of July 27.

The Fiscal Code – particularly the tax rate cuts included in its text, is in limbo after President Klaus Iohannis has returned the bill to lawmakers for further considerations, warning on possible unsustainable fiscal slippage. The lawmakers will meet after August 15 [Aug 24-25 most likely] to discuss the issue. Finance minister Teodorovici said that central bank’s concerns would be considered. But there are high chances that the debates will remain at a political level.

The tax rate cuts stipulated in the Fiscal Code bill, added to the already enacted wage hikes in the public sector next year and the 1%-of-GDP rise in defence spending in 2017, would push the budget deficit to 4.6% of GDP in 2016 and 5% in 2017, according to calculations by the independent Fiscal Council, unveiled at a debate organised by the central bank on July 22.

Romania’s senior ruling Social Democratic Party (PSD) has appointed Liviu Dragnea as president for an interim term. Prime Minister Victor Ponta resigned as party leader earlier this month after allegations regarding money laundering and document forgery. He remains as prime minister.

Key Points
• Ruling party loses further ground against opposition – poll
• Romania's programme with EC remains “off-track” according to EC vice-president
• Romania confirms 4.3% growth in first quarter
• Industrial output falls 0.5% y/y in May
• Retail sales growth slows to 3.1% in May
• Consumer price index falls 1.6% y/y in June, on foodstuff VAT rate cut
• Government posts 0.6%-of-GDP surplus in H1
• Parliament endorses Fiscal Code, including 19% VAT rate
• Public debt up only 0.9% y/y at end-Apr; debt to GDP drops 1.4pp to 37.5%
• Central bank keeps policy rate at 1.75%...
• … but c-bank officials hint Fiscal Code might prompt interest rate hikes
• Credit decrease eases to 0.1% y/y in June, as households’ loans soar by 25%
• New local currency loans extended by Romanian banks in May hit pre-crisis levels
• Exports up 3.2% y/y in May