RSS
IMF recommends the Romanian authorities a stricter fiscal policy if they want to observe the deficit target
In March 2018 IMF appreciated that, without an amendment of the present fiscal policies the Romanian economic growth will become even more fragile. The Fund said that the best option was the combination between moderation of the fiscal policy and the strengthening of the monetary policy. At that moment the international financial institution estimated that the growth rhythm of the Romanian economy would slow down as a result of several factors: the diminution of the fiscal impulse, reduced public investment, the lack of progress with the structural reforms and the harshening of the financial conditions.’We estimate that the growth rhythm of the GDP will be approximately 5% in 2018 to slow down to 3% on a medium term’ IMF said.
According to IMF, the budgetary deficit should be reduced under the neuter cyclic level, both for short and longer term at 1.5% of GDP until 2020, thus contributing to the coming back to the budgetary objective for medium term (MTO) of Romania, according to the commitments to the EU. IMF considers that measures to reach 0.6% of GDP to fulfill the deficit target established by the government at 3% of GDP in 2018 even if they wanted a more reduced deficit target.
In April, in the report ‘ World Economic Outlook’ IMF improved from 4.4% to 5.1% the estimate regarding the evolution of the Romanian economy in 2018.Thus the Fund estimated that Malta and Romania will have in 2018 the highest economic growth rhythms in Europe of 5.7% and 5.1% respectively. In exchange, for 2019, IMF estimated a significant slowing down at 3.5% of the growth of Romania’s GDP.
In June, the IMF warned that the Romanian economy showed signs of overheating, with the risk that the present political route increase the macroeconomic volatility, to undermine the capacity to stand adverse shocks and finally, to slow down the convergence towards the advanced countries in the Eu. Similarly, IMF recommended the Romanian authorities to follow a stricter fiscal policy than the one included in the present plans to stabilize the economy, to regain the room for the fiscal policy and to improve the degree of tax collection and the efficiency of the public expenditure.