The joint mission of the IMF, European Commission and World Bank has finalized the quarterly review of Romania’s economic program. The team’s assessment is that the program remains on track and program policies have been implemented fast.
Romania will register a 1.5 percent of GDP economic growth for 2011 which will further increase in 2012 to 3.5-4 percent of GDP, on basis of improved domestic demand and better absorption of EU structural funds. The inflation rate in 2012 is expected to reach 5.5 percent, while the current deficit is expected to remain around 4.5 percent of GDP. The budget deficit will reach 4.4 percent of GDP (in cash terms) and below 5 percent of GDP in ESA (European system of national accounts) terms in 2011. The government remains committed to reducing the general government budget to below 3 percent of GDP in ESA, about 2.5-2.7 percent of GDP in cash terms.
Prime minister Emil Boc declared during talks with IMF representatives that Romania will pull out of the recession once three quarters of economical growth are recorded and preliminary data enforce this statement. During the same meeting, Petter Harrold, chief of the World Bank team acknowledged that the current agreement with the IMF is the most successful program of an international institution with Romania, since 1990. In the same tone, Jeffrey Franks, head of the IMF team, admitted Romania’s progress in the last two years. The Romanian economy was rated among the worst in the world, in 2009, and is currently surpassing other European countries.
State-owned enterprises will undergo restructuring in order to make them more efficient. Selling of minority/majority stakes and introducing private managers are two of the solutions agreed by the Romanian government. Moreover, arrears payment will have to be addressed in order to stop the drain of resources.
The banking sector remains well capitalized and liquid. Non-performing loans reached 13.4 percent of total loans at the end of June 2011. Banks have also increased lending on the corporate private sector.
This review mission lasted from July 20 to August 1 and the next joint mission is scheduled for late October/early November 2011.