The International Monetary Fund (IMF) warned Romania that its fiscal deficit would come near 3% of the gross domestic product (GDP) next year and would likely pass this level in 2017 as a result of the massive tax cuts and public salary increases, if the Government didn’t come up with compensatory measures. The IMF recommended the Government to maintain a budget deficit of around 1.5%.

According to the IMF, Romania’s Government has taken a pro-cyclical approach by stimulating the economy in a moment when this stimulus wasn’t needed, given the robust economic growth. This will set the country’s public debt on an upward trajectory.

The IMF also pointed out that Romania has managed to keep its budget deficit under 1.9% of the GDP this year only because it had better than expected fiscal revenues and because it sacrificed public investments.

The head of the IMF mission Andrea Schaechter ended a one-week visit in Romania, on October 21. The IMF delegates had meetings with the Government representatives, President Klaus Iohannis, and the Parliament’s representatives.

Before this visit, Romania’s Finance Minister said the Government would try to close a new deal with the IMF next year after the latest one ended in September this year.

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editor@romania-insider.com