Abstract
This paper discusses key findings of the Second and Third Reviews under the Stand-By Arrangement for Romania. Most end-December 2009 quantitative performance criteria were met. The ceiling on the accumulation of domestic arrears at end-September was missed, and preliminary data suggest the end-December target was also missed. The end-2009 inflation rate was slightly higher than the central bank target, but remained well within the inner band of the inflation consultation mechanism. The authorities have agreed to reschedule the benchmark for end-June 2010. IMF staff supports the waiver requested by the authorities.
This statement reports on economic and policy developments since the staff report was issued on February 5, 2010. The information does not alter the thrust of the staff appraisal.
1. Real output continued to decline in the last quarter of 2009. According to the flash estimate, real GDP shrank by 1.5 percent q-o-q (seasonally adjusted) and 6.6 percent y-o-y, bringing the full-year decline to 7.2 percent, roughly in line with staff projections. Short term indicators confirm an incipient recovery in manufacturing, construction and exports, but consumer spending indicators (e.g. retail sales and services) are still declining.
REAL GDP DYNAMICS Annual and Quarterly Growth Rates
Citation: IMF Staff Country Reports 2010, 049; 10.5089/9781451832945.002.A002
REAL GDP DYNAMICS Annual and Quarterly Growth Rates
Citation: IMF Staff Country Reports 2010, 049; 10.5089/9781451832945.002.A002
REAL GDP DYNAMICS Annual and Quarterly Growth Rates
Citation: IMF Staff Country Reports 2010, 049; 10.5089/9781451832945.002.A002
2. Headline inflation accelerated in January due to one-off factors. Annual inflation picked up from 4.7 percent in December to 5.2 percent in January, largely on account of increases in excise taxes on tobacco and fuels. These factors were already anticipated in staff projections, the forecast for end-year inflation remains unchanged. Core inflation continued to decelerate on the back of weak domestic demand.
3. The authorities continue to make progress on key reforms. Pension reform legislation was approved by the cabinet last week and sent to Parliament for debate and approval (end-June structural benchmark). The draft law addresses significant weaknesses of the current system by improving long-term financial sustainability, while adequately safeguarding the average replacement rate for pensioners.
4. The authorities are closely monitoring developments in the region. At this stage, there is little sign of significant spillover effects from dynamics in Greece. The authorities remain comfortable with the level of liquidity and capitalization of local subsidiaries of Greek banks, and do not perceive any increase in financial stress due to recent developments.
