The IMF economic forecast for Romania

The IMF has revised down its latest forecast on Romanias economic growth

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Daniela Budu, 11.10.2023, 13:50

The International Monetary Fund has published its latest economic forecast, according to which the world economy continues to recover from the pandemic, the Russian invasion of Ukraine and the energy crisis of 2022 but the medium-term prospects are mediocre. So, the IMF has forecast a 3% global growth next year, with the US outgrowing Europe. Data shows that Germany is the single G7 economy to see contraction this year. The IMF estimates a 2.2% growth rate for Romania this year from an initial forecast of 2.4% and a 3.8% growth rate next year.

According to the same forecast, the average annual inflation rate in Romania is to be around 10.7% in 2023 and 5.8% in 2024. The IMF expects an unemployment rate of 5.6% similar to last year and of 5.4% for the next year.

Also worth noting is that an IMF mission that has recently visited Romania has announced the deficit will reach 6% this year and go down to 5% next year. According to the IMF experts, the objective of the government in Bucharest in the following years must be a budget deficit of roughly 3% of the GDP. The head of the IMF mission for Romania, Jan Kees Martijn, believes the fiscal measures package the government wants to implement is not enough and that it will be difficult to implement in an election year like the next one. He said the aforementioned package is meant to curb the budget deficit but other programmes are needed to increase the effectiveness and incomes. The priorities of the Romanian government must be, the IMF experts say, an improved tax collection and the elimination of the fiscal exemptions. Jan Kees Martijn also believes that the taxes levied on banks have added an additional burden on enterprises, which could bear on their financial performances. „Fiscal policy also needs to be well planned and clearly communicated to provide predictability for households and firms. Increased predictability of spending on public sector wages and pensions is also important, and the planned reforms in these areas in the context of thee NRRP are vital. These steps would help improve medium-term budgeting” – the IMF expert went on to say.

He also believes that investment in Romanias education and healthcare systems need to continue in order to achieve the EU standards. Privileges in the public system must be eliminated and the green transition supported. We recall that last month the European Bank for Reconstruction and Development revised its forecasts regarding Romanias economic growth. According to the EBRD forecasts Romanias GDP would register a 1.8% growth rate this year and a 3.2% next year.

(bill)