Romania set to have a lower economic growth in 2014

Romania set to have a lower economic growth in 2014

 

By Daniel Stroe – Bucharest

The International Monetary Funds (IMF) predicts a 2.2 per cent economic growth for Romania in 2014, down from 2.8 per cent in 2013, Andrea Schaecther, head of the IMF mission in Romania, said in a press conference today.

„We estimate an increase of the GDP by 2.8 per cent for 2013, the biggest economic growth since the beginning of the crisis. The current account deficit rose by 1.2 per cent of the GDP and exports increased both to the EU countries and outside the communitarian bloc” she said in the conference which wrapped up the visit of the IMF delegation to Bucharest.

Romania is set to have an economic growth of 2.2 per cent this year, Schaechter also said. “It is a smaller growth than last year, but there are other sectors other than agriculture that will play an important role. We are optimistic new jobs will be created. We are now witnessing an increase of the internal demand and exports as well. This year’s budget is based on investments which will lead to an improvement of infrastructure and will give the construction sector an impulse” the IMF head of delegation pointed out. She said she expected new jobs to be created in the manufacturing and service sector.

At the same time, inflation stood at 1.6 per cent at the end of 2013 thanks to a good agricultural output. For 2014, inflation rate is assessed to decrease in the first semester, but will go beyond 2.5 per cent in the second semester. Also, governmental bonds interest rates decreased to a historic lower, Schaecther added.

But she warned that postponement of enforcing a fuel excise has to be compensated by freezing other state budget expenses. The 7 Euro cents excise on fuel the Romanian government has eyed for months to introduce was put off till April amid a heavy political dispute between PM Victor Ponta and President Traian Basescu. The latter warned he would not sign into law a bill on the state budget if this includes the fuel excise which he said would put an extra burden on the Romanian economy.

Meeting the IMF delegation on Sunday, Basescu warned again he would not approve the fuel tax. But Ponta said he would implement it as of April whether Basescu likes it or not. Since the government needs the President’s signature on the memorandum with IMF, Ponta decided to remove any provision about the fuel tax so he gets the head of state’s green light. But he warned that, despite this, he would go on with his plans to enforce the fuel excise which will lead to an increase in prices since many goods are carried by road transporters. Therefore, the fuel tax is likely to turn into an electoral battle ground and Basescu will arguably seize this opportunity.