{
  "title": "IMF Executive Board Concludes 2022 Article IV Consultation with Romania",
  "publication": "IMF News, September 26, 2022",
  "sourceUrl": "https://www.imf.org/en/news/articles/2022/09/23/pr22320-romania-imf-executive-board-concludes-2022-article-iv-consultation",
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  "summary": "IMF Executive Board Concludes 2022 Article IV Consultation with Romania",
  "publishDate": "2022-09-26",
  "sections": [
    {
      "heading": "Background and current situation",
      "content": "- On September 21, 2022, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Romania.\n- After a solid recovery from the pandemic, Romania faces headwinds related to the war in Ukraine, with further spillovers due to its proximity.\n- Output had reached pre-crisis levels in H1 2021 and growth in H1 2022 remained strong.\n- Headline inflation has risen rapidly, driven primarily by the energy price shock and its impact on associated goods and services; inflation expectations have risen more moderately but are also above the target band (1.5­-3.5 percent).\n- The labor market remains less tight than pre-pandemic levels.\n- The authorities implemented an energy price cap and subsidy scheme to help alleviate pressures on the economy and the vulnerable."
    },
    {
      "heading": "Macroeconomic outlook and projections",
      "content": "- GDP growth is expected to moderate to 4¾ percent in 2022 (2021: 5.9 percent), supported mainly by momentum in domestic demand.\n- Energy and food prices are expected to keep inflation relatively elevated until the end of 2023.\n- The fiscal deficit narrowed in 2021 after the pandemic-induced widening and is projected to consolidate moderately further in 2022 as nominal revenue growth has been strong.\n- The current account deficit is projected to remain elevated, but the rebound in FDI and the start of the EU-supported National Recovery and Resilience Plan provide substantial funding."
    },
    {
      "heading": "Executive Board assessment and key policy recommendations",
      "content": "- Executive Directors welcomed Romania’s strong recovery but noted spillovers from Russia’s war in Ukraine and tighter financial conditions that cloud the outlook with downside risks and higher uncertainty.\n- Directors underscored the importance of implementing prudent macroeconomic policies to safeguard macroeconomic stability and reenergizing structural reforms to boost economic growth.\n- Fiscal policy:\n  - Pursue medium-term fiscal consolidation to rebuild buffers, safeguard fiscal sustainability, and reduce external imbalances.\n  - Current energy price caps should be temporary; gradually phase them out and replace them with measures targeting the most vulnerable.\n  - Recommend reforms to pensions and public sector wages to improve medium-term budgeting and ensure predictability.\n  - While welcoming recent tax measures, consider a more ambitious reform of the personal income tax and improvements to the efficiency of the value added tax.\n- Monetary and exchange rate policy:\n  - Monetary policy needs to stay nimble to firmly guide inflation and inflation expectations back toward the central bank’s target.\n  - Policy rates will need to rise further to prevent the entrenching of inflationary pressures and the emergence of a wage-price spiral.\n  - Encourage gradually moving toward a more flexible exchange rate to help address external imbalances and absorb potential future external shocks, together with fiscal consolidation.\n- Financial sector and governance:\n  - The banking sector remains resilient and the macroprudential stance is appropriate.\n  - Call for continued vigilance of financial stability risks and for further strengthening the AML/CFT framework.\n  - Reenergize structural reforms to boost growth and address regional inequalities; emphasize implementing Romania’s National Recovery and Resilience Plan and strengthening public investment management.\n  - Prioritize reforms in green transition and energy security, digitalization, health and education, governance, and anticorruption."
    },
    {
      "heading": "Key statistics and selected economic indicators (as reported)",
      "content": "- Population: 19.3 million (2020)\n- Per capita GDP: US$14,667 (2021)\n- Quota: 1,811 million SDRs (0.4% of total)\n- Literacy rate: 99% (2019)\n- People at risk of poverty: 31.2% (2019)\n- Key export markets: European Union (Germany, Italy, France)\n- Main products and exports: Machinery and transport equipment, manufactured goods\n\n- Selected time series (2020 / 2021 / 2022 / 2023 Proj.):\n  - Real GDP growth (%): -3.7 / 5.9 / 4.8 / 3.4\n  - Output gap (%): -2.3 / -0.6 / 0.2 / 0.0\n  - Unemployment (%): 6.0 / 5.6 / 5.7 / 5.5\n  - CPI inflation (%, period average): 2.6 / 5.0 / 13.3 / 10.0\n  - General government revenue (% GDP): 28.8 / 30.6 / 31.4\n  - General government expenditure (% GDP): 38.6 / 37.5 / 38.2 / 35.7\n  - Fiscal balance (% GDP): -9.8 / -6.9 / -6.4 / -5.1\n  - Primary balance (% GDP): -8.5 / -5.4 / -5.2 / -3.4\n  - Structural fiscal balance 1/ (% GDP): -5.3 / -7.6 / -6.1 / -4.9\n  - Public debt (including guarantees) (% GDP): 49.6 / 51.4 / 51.7 / 52.0\n  - Broad money (% change): 15.3 / 15.8 / 15.1 / 12.5\n  - Credit to the private sector (% change): 14.8 / 17.2 / 12.8\n  - Policy rate (%): 1.5 / 1.75 / …\n  - Current account (% GDP): -5.0 / -7.0 / -7.7 / -7.4\n  - FDI (% GDP): -1.4 / -3.0 / -2.5 / -2.7\n  - Reserves (months imports): 4.6 / 4.2 / 3.6 / 3.1\n  - External debt (% GDP): 57.9 / 55.9 / 52.2 / 51.0\n  - REER (% change), CPI based: 0.9\n\n1/ Fiscal balance (cash basis) adjusted for the automatic effects of the business cycle and one-off effects.\n\nIMF Communications Department — Press Release No. 22/320 (September 26, 2022).\n\n---\n\n\n References\n\n- Romania and the IMF\n- IMF Policy Advice -- A Factsheet\n- Press Releases\n- PRESS CENTER\n- http://www.IMF.org/external/np/sec/misc/qualifiers.htm\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2022/09/23/pr22320-romania-imf-executive-board-concludes-2022-article-iv-consultation"
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    "Published: September 26, 2022",
    "On September 21, 2022, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Romania.",
    "After a solid recovery from the pandemic, Romania faces headwinds related to the war in Ukraine, with further spillovers due to its proximity.",
    "Output had reached pre-crisis levels in H1 2021 and growth in H1 2022 remained strong.",
    "Headline inflation has risen rapidly, driven primarily by the energy price shock and its impact on associated goods and services; inflation expectations have risen more moderately but are also above the target band (1.5­-3.5 percent).",
    "The labor market remains less tight than pre-pandemic levels.",
    "The authorities implemented an energy price cap and subsidy scheme to help alleviate pressures on the economy and the vulnerable.",
    "GDP growth is expected to moderate to 4¾ percent in 2022 (2021: 5.9 percent), supported mainly by momentum in domestic demand.",
    "Energy and food prices are expected to keep inflation relatively elevated until the end of 2023.",
    "The fiscal deficit narrowed in 2021 after the pandemic-induced widening and is projected to consolidate moderately further in 2022 as nominal revenue growth has been strong.",
    "The current account deficit is projected to remain elevated, but the rebound in FDI and the start of the EU-supported National Recovery and Resilience Plan provide substantial funding.",
    "Executive Directors welcomed Romania’s strong recovery but noted spillovers from Russia’s war in Ukraine and tighter financial conditions that cloud the outlook with downside risks and higher uncertainty.",
    "Directors underscored the importance of implementing prudent macroeconomic policies to safeguard macroeconomic stability and reenergizing structural reforms to boost economic growth.",
    "Fiscal policy:",
    "Monetary and exchange rate policy:",
    "Financial sector and governance:",
    "Population: 19.3 million (2020)",
    "Per capita GDP: US$14,667 (2021)",
    "Quota: 1,811 million SDRs (0.4% of total)",
    "Literacy rate: 99% (2019)",
    "People at risk of poverty: 31.2% (2019)",
    "Key export markets: European Union (Germany, Italy, France)",
    "Main products and exports: Machinery and transport equipment, manufactured goods",
    "Selected time series (2020 / 2021 / 2022 / 2023 Proj.):",
    "[Romania and the IMF](http://www.imf.org/external/country/ROU/index.htm)",
    "[IMF Policy Advice -- A Factsheet](https://www.imf.org/en/about/factsheets/imf-surveillance)",
    "[Press Releases](https://www.imf.org/en/news/searchnews)",
    "[PRESS CENTER](http://presscenter.imf.org/)",
    "[http://www.IMF.org/external/np/sec/misc/qualifiers.htm](http://www.imf.org/external/np/sec/misc/qualifiers.htm)",
    "[https://www.imf.org/en/home](https://www.imf.org/en/home)"
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