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Fiscal Council : Romanian economy not out of the woods yet

The Romanian economy has stabilized, but the country is yet to emerge from its worst recession in over a decade, the parliament-appointed Fiscal Council said Thursday.

'We can say with a high degree of probability that the economy has stabilized, but we don't know if the upward trend is confirmed. However, the economic recovery will be slow,' said Ionut Dumitru, president of the Council. Dumitru said the economy declined at a slower pace than estimated in 2010, but the recession was not over yet.

'It's hard to say if the 0.1% growth reported in the last quarter of 2010 will reflect into an upward trend,' he added. Romania's gross domestic product shrank 1.3% in 2010, from a 7.3% contraction in the previous year. The authorities had estimated an economic decline of 1.9% in 2010. For 2011, the government forecasts an economic growth of 1.5%, broadly fueled by exports. 'A growth of 1.5% is small and it hardly influences the purchasing power. It will take another two to three years until the general population can feel any difference,' Dumitru said.

Romania Can Raise Public Salaries By 5%, Pensions By 7% Next Year

Romania's public sector salary fund can be increased this year by no more than 5%, provided the economy grows 1.5% in 2011 and 3.9% in 2012, while public pensions could be raised by at least 7%, the Parliament-appointed Fiscal Council said Thursday.As per Romania's agreement with the International Monetary Fund, personnel expenses may not exceed 7.1% of the GDP in 2012.

Council president Ionut Dumitru explained that the salary fund includes the number of public employees and the average salary, meaning wages may be raised by more than 5% next year, if staff cuts are made.Pensions must be indexed to the inflation rate plus half the real salary growth. Dumitru said inflation will likely be around 6-7% this year, so public pensions should be raised by at least 7% in 2012, putting pressure on the state budget.

The Council points out that the pension system is in a difficult place financially, as budgetary expenses with pensions are unsustainable given the collected contributions.'Increasing the number of contributors to the pension system, raising the retirement rate and other reforms are necessary to improve the pension system's sustainability. The new pension law fulfils these requirements, for the most part, but on the short- and medium-term, the system's financial situation will continue to be a major challenge,' says the Fiscal Council's yearly report.

Sursa: http://www.actmedia.eu

Tags: public pensions dumitru economy council fiscal

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