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The IMF reviews Romania’s economic growth

The IMF revised downwards by one percent the estimate regarding the growth of Romania's economy this year.

Photo: pixabay.com
Photo: pixabay.com

, 17.04.2024, 14:00

The International Monetary Fund revised downwards the estimates regarding the growth of the Romanian economy this year, from 3.8%, as it estimated in October, to 2.8% – shows the latest report of the international financial institution, made public on Tuesday, in Washington. As regards the world economy, the International Monetary Fund announced that it would grow a little more than expected, by 3.2 percent, but warned the central banks against reducing the reference interest rates too quickly. According to the international financial institution, the escalation of the conflict in the Middle East risks leading to an increase in energy and food prices. Returning to Romania, the country will register this year, the IMF estimates, an average annual inflation rate of 6% and 4% in 2025. In October, the IMF estimated for Romania an average annual inflation increase of 5.8% in 2024. Recently, the National Bank decided to maintain the monetary policy interest rate at the level of 7%, the highest in Europe. The annual inflation rate will continue to drop in the coming months, the Central Bank claims, at a slower pace as compared to last year and on a slightly higher trajectory than anticipated.

 

According to the National Bank, the risks arising from the future conduct of the fiscal and revenue policy are amplified in the short term by the result of the budget execution in the first two months of the year, as well as by the wage dynamics in the public sector and the consequences of the new pension law. As for the current account deficit, the IMF expects it to remain at 7.1% of the GDP this year, similar to the level forecast in October and the level reported last year. For 2025, the international financial institution predicts a slight reduction of the indicator in Romania. Regarding the unemployment rate, the IMF estimates a level of 5.6% this year, similar to that of last year.

 

An IMF mission was in Bucharest in January to analyze the country’s economic and financial developments and to review macroeconomic forecasts. The Fund’s mission’s then consultations included numerous meetings with the Romanian authorities, and the discussions also approached the recalculation of pensions. At the end of the visit, Jan Kees Martijn, who led the mission, concluded that economic growth slowed in 2023, primarily due to weaker consumption. Core and headline inflation dipped into single digits in the second half of 2023, while the monetary policy interest rate was kept cautiously on hold. Although the current account deficit remains high, it has dropped to around 7% of the GDP due to slower domestic demand and low prices for imported goods. Currently, Bucharest does not have a financing agreement running with the IMF, but the international financial institution’s representatives periodically carry out missions in all member states. (LS)

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