Romania: 2019 Article IV Consultation-Press Release; Staff Report; Staff Supplement; and Statement by the Executive Director for Romania

IMF Staff Country Reports, August 30, 2019

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Romania: 2019 Article IV Consultation-Press Release; Staff Report; Staff Supplement; and Statement by the Executive Director for Romania

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Bibliographic details

• Published: August 30, 2019
• Series: IMF Staff Country Reports
• DOI: https://doi.org/10.5089/9781513512341.002

Growth outlook and macroeconomic imbalances

• Growth in 2019 is expected to stay above potential at 4 percent, led by continued fiscal stimulus and strong wage growth.
• Growth is accompanied by further widening of current account and fiscal deficits.
• Rising vulnerability calls for a balanced macroeconomic policy mix built on durable fiscal consolidation.

Main findings and risks

• Continued fiscal stimulus and strong wage growth are driving above-potential expansion and widening imbalances.
• Widening twin deficits (current account and fiscal) increase external and macroeconomic vulnerability.
• The more fiscal policy tightens, the less monetary tightening is needed for stabilization.

Policy recommendations

• Start durable fiscal consolidation taking advantage of strong growth.
• Ensure consolidation is underpinned by high-quality measures to rein in the twin deficits and improve the macroeconomic policy mix.
• Modernize revenue administration.
• Improve expenditure efficiency.
• Reassess the new pension law to balance social needs and fiscal sustainability.
• Pursue a balanced macroeconomic policy mix to mitigate external pressure and reduce the burden on monetary policy.

Expected policy effects and objectives

• High-quality fiscal consolidation would:
  • Reduce the burden on monetary policy for macroeconomic stabilization.
  • Mitigate external pressure by containing the current account deterioration.
  • Bolster growth potential by improving the balance between consumption and investment.

Subject areas and keywords

• Subject: Balance of payments; Current account deficits; Expenditure; Fiscal policy; Fiscal stance; Inflation; Prices; Public debt
• Keywords: August policy meeting; CR; Current account deficits; deficit; EU absorption; EU rule; Fiscal stance; GDP expenditure component; Global; IMF staff calculation; Inflation; inflation pressure; ISCR; share of foreign direct investment

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