IMF recommends Romania to maintain a restrictive monetary policy

The International Monetary Fund (IMF) recommends Romania to maintain a restrictive monetary policy, considering the increased basic inflation increased in Romania, partially because of the domestic demand pressure, the IMF noted in a regional report on Europe, published on Wednesday.

"In Romania and Turkey, monetary policy should remain restrictive, in order to keep inflationary pressures under control and strengthen monetary policy credibility," said the IMF.

According to the "World Economic Outlook," published in October, IMF revised upwards its outlook regarding the evolution of consumer prices in Romania in 2019, up to an annual average increase of 4.2 per cent, compared with an advance of 3.3 per cent estimated in the spring, while prices are expected to increase by 3.3 per cent in 2020, against an increase of 3 per cent estimated in the spring.

In what concerns the fiscal policy, IMF claims that, considering the fact that many countries are close to the maximum employment level, and also considering the high debt level in many European states, the fiscal position should remain anchored in the medium-term budgetary objectives, allowing the automatic stabilisers to operate freely.

The countries with a high debt level and high deficit should continue fiscal consolidation, in order to reduce economic vulnerabilities, except for such cases where private demand is so weak that a consolidation would drive growth far below potential, showed the IMF report.

Moreover, the international financial body insisted on the structural reforms again, which remain essential in improving growth potential. According to the IMF, policies meant for improving the workforce participation rate and improving human capital (including through transferring taxes from labour, extending training programmes and adjusting education to the needs of the labour market) should be implemented immediately, considering the increasing challenges and technological developments in the region," says the IMF.

And finally, the IMF said that, in many emerging states in Europe, strengthening government and improving public sector efficiency remain essential in supporting the process of convergence of life standards to match those in developed Europe.

Last month, the International Monetary Fund (IMF) revised upwards, to 4 per cent, its outlook regarding the development of the Romanian economy this year. After estimating in April that Romania will record an economic growth of 3.1 per cent this year, to be followed by an advance of 3 per cent in 2020, in its "World Economic Outlook" report, published in mid-October, IMF revised upwards its forecast regarding the advance of the Romanian economy up to 4 per cent in 2019 and 3.5 per cent in 2020.