Romania’s Pension Sys Is Vulnerable To Political Pressures – WB

Several European states have very clear pension adjustment rules, according to the evolution of prices, the international institution stated in a report drawn up for the Romanian authorities and obtained by MEDIAFAX.

According to World Banks analysts, the “significant” pension increases made by the Romanian authorities in 2007 and 2008 will lead to a 2.3% of GDP deficit in the pension system starting with this year, but the deficit is estimated to reach 6% of GDP in 2050.

Fiscal pressures are also generated by the relatively early retirement age, and World Bank experts suggest the Romanian authorities to scale up the retirement age for women and equalize it with the one set up for men. This measure would reflect an increase in life expectancy.

Another problem identified by the World Bank is the country’s ageing population, which would render the pension system’s fiscal situation more difficult.

Thus, the dependency rate of the persons receiving state pensions, representing the ratio between the number of contributors and the number of beneficiaries, will hike from 85% in 2007 to 164% in 2050, according to World Bank’s estimations.

The World Bank said that, despite the Government’s policy of freezing social contributions, they are still high and increase labor costs and this situation threatens Romania’s manpower competitiveness and leads to companies not declaring the real number of people they employ and their real salaries. This would affect the respective employees who will not get state pensions when they retire.

The estimated economic slowdown might reduce the number of employees, affecting thus the pension system’s revenues, while the expenses will be kept at least at the same level, the World Bank analysts said in the report.

Some of the WB recommendations for Romania regarding the pension system is cutting the recent pension hikes, setting up some clear pension adjustment regulations, increasing the retirement age, solving the manpower competitiveness problems and improving the quality and the efficiency of the management and surveillance systems.