The International Monetary Fund's (IMF) Executive Board has deemed economic recovery in Romania as “fragile.” Following the conclusion of the 2012 Article IV Consultation of Romania, the IMF's Executive Board released a brief economic health check for the country. The 0.9 percent GDP growth estimate was again given for 2012, with 2.5 percent growth projected next year.

The Board's statement was essentially a repeat of other recent IMF statements on Romania: the government's reform efforts were praised and banking system safeguards lauded, but there was the usual chiding remarks on the speed of the privatization program of state owned assets. Again, the IMF has urged Romania to press ahead, yet there is no mention of the disastrous attempts at privatizations in 2012. The Executive Board's position is the exactly the same as at the start of the year, before the Cupru-Min and Oltchim fiascoes.

The IMF also recommended taking further steps to reduce government arrears, particularly at local government level. Romania's woeful EU funds absorption rate was highlighted and improving it should be top of the government's to do list. More reforms are needed in the energy and transport sectors, according to the IMF, and there is still more the government can do to improve the business environment via changes in legislation.

On foreign exchange rate policy, the IMF encouraged limited interference by Romania's Central Bank, suggesting that it act only to smooth volatility. Although existing banking system safeguards were praised, the IMF recommended further strengthening of banking supervision and safety nets.

Liam Lever, liam@romania-insider.com

(photo source: IMF)