Romania’s economic growth revised as unemployment reaches a three year high

Romania’s economic growth revised as unemployment reaches a three year high


By Daniel Stroe – Bucharest

The International Monetary Fund (IMF) has revised Romania’s economic growth prognosis to 2 per cent this year up from the initial 1.6 % after new figures show bigger exports in the first semester and outline the prospect of a better agricultural output.

“We see the economic recovery is accelerating and continues to do so. In the first part of the year, exports were more intense while the internal demand was weaker. The agricultural production is better than last year. Taking these into account, we have raised the economic growth projection to 2 per cent for this year and we expect this recovery to continue next year for which we have a 2.25 growth projection” Andrea Schaechter, head of the IMF mission to Romania said today.

Liviu Voinea, the Budget minister, had previously disclosed that, following talks with the IMF delegation, the economic growth projection was raised from 1.6 per cent to 1.9%, but underlined the GDP at the end of the year might go beyond this target.

Under these circumstances, the new budgetary rectification this year has just been made on the basis of a GDP amounting to 626.2 billion lei (142 billion Euros), with an excess of 2.6 billion lei (about 590 million Euros).

But the good news concerning the economic prospects has been tempered by new figures on unemployment released today the National Statistics Institute (INS). The unemployment rate rose to 7.6 per cent in June, the largest since 2010, compared to 7.5 per cent in May, with the overall unemployed people reaching 736.000 last month, up from 720.000 the previous month, according to INS. Broken down, the unemployment rate among men is 8.3 per cent, while 6.8 per cent of women are without a job.

The new statistics come as Romania has concluded a two year long preventive agreement of 4 billion Euros, an amount which will be equally provided by the IMF and the European Commission.IMF’s Schaechter has warned today that the decrease in the VAT for bread from 24 to 9 per cent is a temporary measure, unlike statements so far from the Romanian government, and the international creditor will assess the impact of the measure on the fiscal evasion, as the government in Bucharest argued when proposing the measure. If the measure fails to show effects, IMF may reverse the cut.