- Gov’t upholds commitment to adopt the Euro on 1 January 2019 * GDP growth to rise from 3.2 pc in 2015 to 4 pc in 2018
Romania has sent to Brussels last week its Convergence Program 2015-2018. This is the sixth edition of the document that the Public Finance Ministry (MFP) has started to draft in 2009 in line with the European Council regulations on the consolidation of budgetary positions and the supervision and coordination of economic policies.
Compared to the main scenario, in the current variant of the Convergence Program the economic growth forecast estimates, against the backdrop of the fiscal measures proposed by the government, a supplementary GDP growth of 0.5 – 0.8 percentage points in real terms, the Finance Ministry appreciates in a communiqué.
The Romanian Government upholds its commitment, included in the previous Convergence Program, to adopt the Euro currency starting on 1 January 2019, the communiqué points out.
According to the MFP, in 2014 Romania registered a structural budget deficit of 1 per cent of GDP, the planned targets being 1.45 per cent of GDP in 2015, which includes a 0.25 percentage point aid for the co-financing of projects financing with European funds, and below 1.2 per cent of GDP in 2016-2018 (according to ESA methodology).
In what concerns economic growth, in 2014 the GDP grew by 2.8 per cent, 2014 being the fourth year of growth. “In the following years a gradual acceleration of the GDP growth rhythm to 4 per cent in 2018 is expected. Private consumption is also expected to register annual growth rhythms, from 3.5 per cent in 2015 to 4.1 per cent in 2018. The government consumption will be determined by a budgetary policy characterized by a stabilization of occupancy in the public sector and rationalization of expenditures on goods and services,” the document points out.
In what concerns investments, the authorities consider that the 2014 situation was temporary and in 2015-2018 growth will be registered, being backed by more substantial inflows of European funds.
“Thus, growth will accelerate annually from 4.5 per cent in 2015 to 6.8 per cent in 2018,” the document points out.
According to the program, net exports will lower their contribution to the GDP’s real growth compared to 2014, being set to have a negative contribution in 2015-2018.
“From the point of view of real convergence, evaluated through the lag behind average European GDP per capita expressed through purchasing power standard (PPS), Romania progressed significantly in the last two years, currently standing at 55 per cent of the EU-28 average, compared to 54.5 per cent in 2013 and 52.8 per cent in 2012,” the aforementioned document shows. “In line with the economic developments presented in this Program, Romania’s real convergence will reach approximately 65 per cent in 2018, with the GDP per capita expressed in PPS expected to represent 71 per cent of the European average in 2020,” the document adds.
The Governor of the National Bank of Romania (BNR) recently stated that in order to adopt the Euro on 1 January 2019, Romania has to join the Exchange Rate Mechanism (ERM-II) on 1 January 2016.
Likewise, he reminded that BNR needs another year or year and a half in order to complete the process of aligning the mandatory minimum reserves to the European Union level of 2 per cent, considering that the Central Bank has adopted a gradual approach in this regard because of the potential impact on the exchange rate.
“This is yet another reason why joining the ERM-II in 2016 and, consequently, adopting the Euro in 2019 are very ambitious goals,” the BNR Governor underscored.
In his opinion, adopting a target date is a good idea for Romania, provided it acts as a catalyst for all the factors that have to contribute to the attainment of this goal.