Fiscal moderation and a tighter monetary policy would be the best combination for Romania in the future as the strong economic growth the country recorded last year risks becoming more and more fragile, the International Monetary Fund (IMF) warns.

The increase in budget, trade and current account deficits and the low investments will reduce the country’s space for manoeuver and weaken its development potential, according to Jaewoo Lee, the head of the IMF mission to Romania, local News.ro reported.

IMF expects Romania’s economic growth rate to slow down to 5% this year and 3% on the medium term, from a record 7% in 2017.

“Overall, Romania’s economy is doing well, it had the highest growth rate in EU last year. But this growth may become more fragile in the absence of some measures. Fiscal moderation and a tighter monetary policy would be the best combination for Romania,” Lee said.

He added that the rapid growth in 2017 was based on consumption and warned that this has also increased the fiscal and trade deficits.

The IMF representative also pointed out that Romania had weak results in tax collection and that modernizing the tax IT systems should be a priority for the Romanian authorities. He also believes that measures to limit mortgage lending would be useful, in order to limit the local banks’ exposure to the real estate sector.

editor@romania-insider.com