After just a few years since Romania gave up the agreement with the IMF (“International Monetary Fund”), which drew austerity policies that have strongly influenced government decisions, our country is not far from signing a new agreement. My opinion is based on the fact that during the last year Romania had a spectacular economic growth, but was based on consumption, and the debt to equity ratio had no impact in public investment. On the other hand, last year’s populist promises and their implementation during this year, without a real economic support, will push us very fast towards a new agreement with international lenders.
The aspect supporting this scenario is that Romania, the Romanian Government, although needs the European funds which are available, has no money to ensure co-investments of European projects. If the amounts needed for co-investments would be made available from the state budget, the budget deficit would exceed the 3% of GDP imposed by the EU Commission.
Given those premises, I am skeptical about achieving a 5% economic growth based on which the 2017 budget was drafted. Thus, this scenario could generate two effects. Whether we will see a decrease of budgetary expenditure as regards the increase of pensions and salaries in public sector, easily offered until now by the government, whether we will have an increase in taxes. Another aspect that we must consider is that the budget was adopted with delay. Such delay, plus the heavy bureaucracy and the burdensome procedures for public tendering will generate a very low level of public investment. The decreased amounts of state investments will be a breathing space for the government because it will reduce the pressure on the budget deficit.
The road followed by the government this year, plus the evolution of the proceeds in the first months of the year, well below the forecasts, gives me confidence that at the end of this year or in early 2018, the renegotiations on a new agreement the IMF will start. With all the disadvantages which such agreement will have, as we have to request funds again from international creditors and to implement their austerity policies.
Dr. ec. Adrian CRIVII, FICS, REV, MAA
Director general DARIAN DRS SA
Adrian Crivii is the founder of Darian DRS SA and the coordinating partner of the management teams across all the divisions of Darian Group. He has also been a member of ANEVAR since 1993 and an honorary member of the Royal Institution of Chartered Surveyors (RICS). Adrian Crivii is a REV valuer (Recognised European Valuer) and graduated the Machinery and Equipment Valuation Course (ME 201-206) of the American Society of Appraisers.
