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| Economic Prospects for 2012 |
| (2011-11-08) |
| Last updated: 2011-11-09 12:55 EET |
Romania has fulfilled the criteria agreed with the IMF – that is one of the conclusions of the two weeks’ discussions held between the Romanian authorities, the European Commission, the IMF and the World Bank experts in Bucharest.
The head of the IMF delegation, Jeffrey Franks, said that the economic prospects for Romania in 2012 had worsened and that it was vital that the Romanian government should stick to a cautious fiscal policy. The authorities have pledged a 1.9% deficit for next year, and committed to freezing all public sector salaries and pensions, with the possibility of increasing them mid-2012, if budget revenues allow it.
Jeffrey Franks: “Reaching the deficit target in 2012 implies some difficult measures, including the freeze of public sector salaries and pensions. We admit that that is a cautious budget and we have agreed that in case the market conditions allow it, a limited increase of public sector salaries and pensions might take place in mid 2012, according to the legislation on public sector salaries and pensions.”
Against the backdrop of negative international developments, the IMF and EC experts have downgraded the Romanian 2012 economic growth forecast. Experts predict that this year economic growth will stay at 1.5%, sustained by strong exports, a good agricultural year and the recovery of domestic demand. For 2012, the IMF forecasts a growth rate of 1.8%-2.3%, on the condition that European fund absorption improves and domestic demand rises.
The main challenge facing the Romanian authorities is the implementation of certain measures, the root and branch reform of state-owned companies, and the reduction of debts posted by those companies, which account for 4% of the GDP.
Inflation has also fallen considerably due to a good harvest, and financial institutions expect inflation to further drop in the coming months. The National Bank has downgraded its inflation forecast for the end of this year from 4.6% to 3.3%, and has done the same for next year, going from 3.5% to 3%. 2012 is going to be more stable than this year, there should not be any major price fluctuations, and banks might gradually reduce interest rates on loans.
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