EC says Romania further confronts with risk of current account deficit deterioration

While there is still a risk of a further current account deficit deterioration in Romania, an economic slowdown among some of the country's main trade partners might also find Romania's current account unprepared to cope with a drop in exports, the European Commission showed in the Country Report regarding Romania, published on Wednesday.

According to the Community Executive, the measures adopted by the Romanian authorities contributed to a deepening of the current account deficit and the risks to competitiveness costs. "Past decisions on public and minimum wage increases have played a major role in increasing risks to cost competitiveness. While public wages are not expected to increase significantly in 2020 and 2021, a new minimum wage increase of 7.2% was adopted for 2020. The persistence of a large discrepancy between a strong domestic demand, fuelled by an expansionary fiscal policy, and a weakening external demand resulting in a widening current account deficit, further increases the government's and the economy's external
financing needs," the EC report underscores.

On the other hand, the European Commission argues that the risks to the financial sector have decreased after the end of 2018, but regulatory uncertainty still persists. "In January 2020, the government amended the most damaging provisions of government emergency ordinance 114/2018. However, legislative uncertainty affecting the business environment, and in particular the financial sector, appears to persist and requires monitoring," the quoted document mentions.

The European Commission published on Wednesday the 27 country reports of the analysis called "2020 European Semester: Assessment of progress on structural reforms, prevention and correction of macroeconomic imbalances, and results of in-depth reviews under Regulation (EU) No.1176/2011." AGERPRES