Monday, January 2, 2012

The Balance of Payments Programme for Romania

MEMO/11/944.Brussels. December 2011. European Commission report concludes balance-of-payments assistance programme remains on track in Romania Today, the European Commission publishes its staff assessment following the latest review of the joint EU-IMF financial assistance programme for Romania, carried out in Bucharest from 25 October to 7 November 2011. The mission concluded that the programme remains on track. The Romanian authorities have made good progress in implementing programme policies under very difficult conditions. Looking forward, prudent macroeconomic policies and accelerated structural reforms are important to ensure strong economic performance and instil market confidence.

After two years of negative growth, real GDP is expected to grow by around 1½-2% in 2011, above previous projections. A further slight acceleration towards 1¾-2¼% is expected for 2012. Inflation has come down sharply this summer - thanks to easing food prices and the base effects linked to last year's VAT hike - to the inflation target range of 3.0% ±1 percentage point defined by the National Bank of Romania (NBR). The current account deficit is projected to remain below 5% of GDP in both 2011 and 2012.

The on-going deterioration in asset quality and increasing loan-loss provisions continue to weigh on the profitability of the banking sector. In spite of tensions in global financial markets and deterioration in the quality of domestic assets, the banking sector has remained resilient with the capitalisation of the banking sector being kept at adequate levels (13.4%).

Public finance developments until the end of September are consistent with meeting the 4.4% of GDP cash deficit target in 2011. For 2012, the Romanian authorities target a 1.9% of GDP cash deficit which should make it possible to comply with the below 3% deficit target (based on the standards of the European System of Accounts, ESA) for 2012, by a comfortable margin.

The Romanian authorities are implementing structural reforms, mainly in the energy and transport sectors, and restructuring state-owned enterprises. This autumn, the Romanian Government appointed a new Minister to be specifically in charge of coordinating EU funds, with a view to make better use of EU funds.

The mission for the next programme review is scheduled for late January - early February 2012.

First Review-Autumn 2011. Directorate-General for Economic and Financial Affairs.

For information about Projects in Romania see EASTERN EUROPA Projects