IMF mission says Romania should reassess increases in public wages and pensions

The International Monetary Fund (IMF) mission to Romania, led by Jaewoo Lee, concluded their visit to Romania on Monday, November 12, after meetings with finance minister Eugen Teodorovici, central bank governor Migur Isarescu, government officials and private sector representatives.

The IMF team concluded that economic activity in Romania remains strong, with unemployment at a record low while concerns about overheating have lessened with a recent slowdown in activity and inflation pressures for the year appear to have peaked.

However, Romania needs to take measures to lower its budget deficits and carry out reforms to raise its growth potential.

“Fiscal consolidation would enhance room for fiscal policy maneuver, thereby reducing the economy’s vulnerability to domestic and external shocks. Despite several years of strong growth, the budget deficit has gone up rather than down, as it should during good times, and the 2018 target remains at risk without further measures,” said Jaewoo Lee, the head of the IMF mission.

In this sense, “increases in public wage and planned changes to pension benefits should be reassessed for their negative implications for fiscal sustainability and long-term growth,” according to the IMF representative.

“Well-targeted structural reforms and strong governance are needed to raise growth potential. Strengthening public investment institutions remains a priority to help address Romania’s large infrastructure gap, including by facilitating higher absorption of EU funds,” Lee also said.

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