The International Monetary Fund has improved the economic forecast for this year to 2% and to 2.5% for 2014.
In spite of the fact that international financial institutions, the Romanian government and economic analysts estimated at the start of the year that Romania will register an economic growth rate of 1.6% in 2013, they have recently revised upward the growth rate. For instance, the International Monetary Fund has improved the economic forecast for this year to 2% and to 2.5% for 2014, against the backdrop of bigger exports and a better agricultural output than in 2012.
The IMF estimates that Romania’s current account deficit will further decrease to 2 or 2,5% of the GDP this year, and the inflation rate will also go down by the end of the year, within the limits targeted by the National Bank of Romania. The head of the IMF mission to Romania, Andrea Schaechter, has said that “as regards the fiscal policy, the Romanian government is determined to achieve a gradual fiscal consolidation.
Once the budget revision announced, the government made public its decision to reach a deficit of 2.3% of the GDP on cash and 2.4% on the European System of Accounts (ESA) this year, as well as a structural deficit below 1% of the GDP until 2015”, says Andrea Schaechter. VM She has mentioned that the fiscal policy will be supported by institutional reforms, including measures to stimulate medium term planning, develop the administrative capacity, speed up the absorption of European funds, consolidate fiscal administration and governance and ensure a better control of arrears.
Nevertheless, according to the September report issued by Economist Intelligence Unit, Romania’s economy will go up by 2.5% in 2013, which “mirrors the situation in the Euro zone, with the growth rate expected to increase considerably in the 2014-2017 period, up to an annual average rate of 4%”.
“There are no miracles in the economic field and nothing can replace a correct combination of economic policies in order to achieve a sustainable development of the country”, says the governor of the National Bank of Romania, Mugur Isarescu. He also says that in the following period of time, this should be Romania’s target:
Mugur Isarescu: “I believe that Romania’s main objective in the ensuing period of time is a balanced, sustainable and inclusive economic growth. By ‘inclusive’ we understand an economic growth which creates jobs.”
In order to obtain such an economic growth rate, the relevant authorities should first solve the major imbalance, which is likely to occur in the next 10-20 years, namely the ratio between the number of pensioners and employees who contribute to the pension system, says Mugur Isarescu. Furthermore, increasing the economic growth rate to a level that exceeds its natural potential should also be avoided in pre-election period, because such an approach does nothing else but favour decline in the post-election period.
"We’d better obtain an annual 4% growth rate, for a period of 10-12 years, than to achieve a 7% growth rate for only 2-3 years”, says the Central Bank governor. Mugur Isarescu has also added that in the current context, special emphasis should be laid on economic stability and internal resources.
In his turn, the first deputy governor of the National Bank of Romania, Florin Georgescu, says the state should play a crucial role in making a correct combination of economic policies, in efficiently managing the shares it still holds in the economy and in supporting entrepreneurial actions, by diversifying state-aid schemes. However, it needs resources for all that:
Florin Georgescu: “In order to produce such supporting effects on the investment–making sector, the state should have an available, predictable and consistent flow of financial resources, because, otherwise, it lacks credibility. This predictable and consistent flow of financial resources can be ensured only by applying a rigorous financial discipline in the case of all contributors, be they natural persons or legal bodies. This discipline should also be based on a disambiguated fiscal and financial-accounting legislation. All the existing breaches and gaps in this legal framework should also be eliminated.”
In turn, the President of the Fiscal Council, Ionut Dumitru, says that although Romania’s economic growth forecast for 2013 has been improved, this will not be reflect in an equal increase in budget revenues.
Ionut Dumitru: “I don’t believe that this will bring bigger revenues to the budget because the economic growth is based on exports, which don’t generate bigger revenues to the budget and on the agricultural sectors of the economy, which do not have a substantial contribution to the budge either”.
The vice-president of the European Investment Bank, Mihai Tanasescu has said that in order to ensure economic growth, which is essential to absorb European funds, Romania should take some steps:
Mihai Tanasescu: “We stand a big chance, an unique chance that other countries don’t stand, namely the opportunity to attract more European funds, to be able to use cheap investment money, such as those coming from the European Investment Bank, to be able to use resources for big projects, so that the economic growth rate reaches Romania’s potential, of 3-4%. This thing is achievable, in 2-3 years’ time. This potential can be reached.”
According to the aforementioned report drawn up by Economist Intelligence Unit “a better absorption of European funds will contribute to the investment in infrastructure and subsequently might lead to an increase in Romania’s exporting potential on the long term. Romania has obtained structural funds worth 22 billion Euros from the EU budget, for the following budgetary term. Romania will also receive funds for agriculture, worth 17.5 billion Euros in the 2014-2020 period, under the Common Agricultural Policy, which is a significant increase from the 13.8 billion Euros in the 2007 – 2013 period.