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IMF and Fitch warning: Romania is vulnerable

Romania continues to be vulnerable to the crisis on the international market, with one of the country's main problems being represented by the inflation, as the price rises for food and energy have already accelerated the inflation above the prognosis of the Romanian National Bank (BNR), says the International Monetary Fund (IMF). Romania's vulnerability was also highlighted by the financial rating agency Fitch.

The annual inflation rate doubled from 3.8 percent in May 2007 up to 8.5 percent in the same interval this year, supported also by the growth in the demand on the local market. BNR set the 2008 inflation target at 3.8 percent, with a variation interval of one percentage point. Referring to the monetary policy, the IMF representatives hailed the central bank's commitment to stability of the prices in the context of a difficult economic climate and also stressed the necessity to stabilize the inflationary expectations. The institution stressed, at the same time, the importance of the discipline in the public sector and the resistance to pressure in the interval ahead, harsher policies and the intensification of the structural reforms, in order to support convergence on the EU level, taking into account also Romania's plans to adopt the euro currency in 2014. IMF appreciated the sustained economic growth pace in Romania in 2007 and 2008, amid curbed unemployment and maintained foreign competitiveness, with such developments having contributed to an important advance in the income per capita. The IMF representatives advised the Bucharest authorities to strengthen the fiscal institutions and to promote a tax policy more oriented towards such objectives on a medium-term, to result in an increase in the public spending and to improve also the capacity of the country to absorb the EU funds. Romania's vulnerability was also highlighted by Fitch agency, which placed Romania 11th, the same as Egypt, in a ranking having taking into account the 16 most vulnerable to inflationary shocks emergent economies. Romania is thus more vulnerable to emergent shocks than Kenya, the Republic of Moldova and Estonia, but with a lower risk degree compared with the European countries such as Ukraine, Bulgaria, Latvia and Lithuania. As a reaction to the acceleration of the inflation much above the target, the BNR has already increased the monetary policy rate several times, from 7 percent in October 2007 up to 10 percent in June 2008. Fitch Ratings considers the perspective of the economy and the crediting sector on the emergent markets will deteriorate, mainly because of the rapid acceleration of the inflation. Sursa: http://www.rompress.ro

Tags: percent fitch inflation romania vulnerable euro bnr

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