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International Monetary Fund

Disinflation and current account deficit, potential problems for Romania

de     HotNews.ro
Vineri, 5 mai 2006, 0:00


IMF board considers Romania’s economic progress very encouraging, but it draws attention to the potential problems that might arise if the pace of disinflation slows down, and the current account deficit amplifies.

For this year, the IMF forecasts an economic growth of 5.2%, an inflation rate of 6.5% and a current deficit account of 8.5%, according to a public information note released by the Fund.

The IMF board encouraged Romanian authorities to tackle these two problems and to promote economic growth. The caution came following a meeting on the closure of chapter IV Article "Consultations with Romania" on April 26.

The Fund appreciated the economic policies implemented by Romania regarding financial strengthening, disinflation, financial performances of small and medium enterprises, privatization. However, IMF forecasts a drop of the inflation rate to 6.5% for 2006, above the 5 %threshold targeted by the National Bank of Romania this year and in 2006, plus or minus 1 percent.

The IMF also expressed concern regarding the Romanian Government’s decision to raise the deficit target for 2006, following the budget rectification in mid April for the quick launch of projects in priority domains. The target for the budget deficit grew to 0.9% from 0.4%, following the rectification. In 2004, the general budget deficit was 9.8% of GDP.

IMF experts underlined that the loan expansion contributed to the widening of the account deficit to 8.7% of GDP in 2005. In 2006 the deficit is forecast at 8.5%.
























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