Romania Faces Risks That May Trigger Econ Downward Spiral – World Bank

The internal and external financing reduction, due to the international financial crisis and negative sentiment on emerging economies, might limit Romania’s access to loans in the near future, which would harshen the crisis’ effects on the local economy, the World Bank noted in the report, obtained by MEDIAFAX.

World Bank analysts also stated that confidence in the Romanian economy might be negatively affected if the new government doesn’t act "aggressively" to support the monetary policy and the narrowing of budget and current account deficits.

Foreign capital inflows might be further reduced, with a direct impact on banks’ liquidity and their capacity to grant loans, according to the World Bank’s report.

On the other hand, the Romanian Finance Ministry should get more involved in monitoring and evaluating financial stability problems, World Bank experts said.

They also stated that the measures adopted by the former government would trigger significant pressures this year.

World Bank analysts recommend a prudent fiscal policy, that would correct the current imbalances and keep the deficit under control, that would be supported by medium-term reform programs.

To stimulate budget revenues, the World Bank recommends the continuation of tax policy modernization and simplification, the increase of certain taxes, such as the vice tax, the resuming of state companies’ privatization process, and the sale of carbon credits.

As for cutting expenses, WB recommends Romanian authorities to reconsider pensions and salaries hike, to prioritize capital expenses this year, and to revise subventions granted and expenses in sectors with recurrent costs.