Romania’s economy sees increased overheating risk, said Emil Stavrev, a deputy director of the International Monetary Fund’s European Department.
The government should withdraw the fiscal stimulus and reduce the budget deficit, as the economy is growing above its potential, with the risk of fueling inflation and unbalancing the country’s external position, Stavrev told Profit.ro.
The IMF has calculated a cumulative fiscal stimulus of about 3% of the potential GDP for 2017 and 2018. It is the third highest in Europe after Greece and Bulgaria, which could fuel potential risks to the economy, he said.
Emil Stavrev was in Bucharest together with an IMF Washington delegation to present a regional report on the state of the economy and reform in the judiciary at the National Bank of Romania (BNR).
“The potential GDP is below the pre-crisis level and wage increases have been very high, namely two-digit, including due to significant increases in the minimum wage and in the public sector,” the IMF official added.
Romania’s economy increased by 8.8% in the third quarter of this year, according to the National Statistics Institute (INS).