Romania made a quick recovery after the 2008–09 global financial crisis, thanks to an aggressive fiscal austerity program and prudent macroeconomic management. The crisis prompted long-needed reforms, with support from international financial institutions (IFIs) in health (hospital rationalization and improved drug procurement), education (correcting skills mismatches, improving ICT education, and introducing a loan scheme for tertiary education), the financial sector, public financial management, public administration, social insurance (improving public pensions), and social assistance programs (improved targeting).
Romania’s projections as of January 2013 estimate a real GDP growth rate around 0.6 percent in 2012, with growth rising to 1.6 percent in 2013. Its unemployment rate has remained at around 7.2 percent since 2009. At end-2011, inflation fell to 3.1 percent, compared to 7.9 percent one year earlier. Challenges to maintaining growth include reducing the state’s role in the economy (reforming the inefficient state-owned enterprises), maintaining political stability, coping with uncertainty in the Eurozone and exports markets, and increasing the absorption of EU funds.
In the medium term, Romania must achieve steady economic growth and improve living standards while meeting fiscal targets, and continue structural reforms and the modernization of public administration.
Sustainable long-term growth entails that Romania adopt measures that ensure compliance with fiscal targets while clearing arrears and improving the quality of spending and strengthening tax collections; make progress on the structural reform agenda, with a focus on promoting private sector investment in the energy and transport sectors; and ensure continued financial sector stability through improved regulation and fewer nonperforming loans.
Supported by the agreements with the International Monetary Fund (IMF), the European Commission (EC), and the World Bank, internal and external imbalances have been substantially reduced, and the fiscal deficit gradually declined to an expected 2.2 percent of GDP in 2012, through a combination of expenditure cuts and tax increases. Continued firm policy implementation and the maintenance of fiscal, monetary, and financial sector buffers, in the context of the IFI agreements, will safeguard against risks to macroeconomic stability. The Bank is supporting improved service delivery in the social sectors through traditional investment loans and results-based financing in the health sector. In the medium term, Romania also needs to advance the unfinished structural reforms agenda, increase the efficiency of public administration and the performance of the energy and transport sectors, and focus on the absorption of EU funds. This is currently being addressed through the ongoing lending portfolio and, as of 2012, the increasing reimbursable advisory services program.