Press Release: Statement at the Conclusion of the IMF and EC Staff Visit to Romania

IMF News, February 4, 2014

Source details

Canonical URL: Press Release: Statement at the Conclusion of the IMF and EC Staff Visit to Romania

Teams from the International Monetary Fund and the European Commission visited Bucharest during January 21-February 4 to conduct discussions on the combined first and second reviews under the IMF Stand-By Agreement (SBA) and on the status of Romania’s precautionary balance of payments program with the European Union.
Staff level agreement has been reached.
The program remains broadly on track.
Most end-December performance criteria were met and structural benchmarks have either been met or are nearing completion.

2013 real GDP growth: an estimated 2.8 percent, driven mostly by robust industrial output and an abundant harvest; continued strong exports while domestic demand remained subdued.
2014 real GDP projection: 2.2 percent, with domestic demand firming on the basis of a supportive policy framework, better absorption of EU funds, and an improvement in confidence.
Inflation outlook: historically low inflation is projected to decline further in the first half of 2014 before returning to the upper part of the central bank’s target band in the second half of 2014.
Current account deficit: expected to remain between 1 and 1.5 percent of GDP, contributing to Romania’s strong external position.

The authorities approved a budget consistent with a deficit target of 2.2 percent of GDP for 2014.
A subsequent delay in the implementation of excise taxes on fuel products will be compensated with freezes on the expenditure side.
The authorities intend to continue fiscal adjustment in 2015 to reach Romania's medium-term budgetary objective of a structural deficit of 1 percent of GDP, while accommodating expected further increases in co-financing of projects supported by the EU.

Monetary policy continues to be accommodative, which has translated into a considerable reduction in lending rates.
Combined with the government loan guarantee programs, this should enable lending activity in lei to start a modest recovery.
Notwithstanding pressures on asset quality, the banking sector continues to maintain reassuring capital, liquidity and provisioning buffers.

Progress on reducing state-owned enterprise arrears has stalled.
Corrective actions are being launched, including budgetary transfers and restructuring measures.
An action plan to sustainably lower arrears over the medium term will be defined.
Building on the success of the Romgaz IPO, progress toward completion of IPOs of three other state-owned enterprises remains broadly on schedule.
Regulatory reforms in energy and transport sectors are set to continue, as well as deregulation of the gas and electricity prices, in line with the earlier agreed roadmaps.

IMF Press Release No. 14/42 — Statement at the Conclusion of the IMF and EC Staff Visit to Romania (February 4, 2014).