“For 2014, we estimate a constant real GDP growth, also of 2.2%, but we expect the key driver will shift from net exports to domestic demand, particularly due to bigger investments in the economy on the back of a better absorption of EU funds,” IMF mission chief Andrea Schaechter said Tuesday.
Speaking at the IMF’s mission wrap-up in Bucharest, Schaechter said the stronger domestic demand should give a boost to the current account, which is expected to increase to 1.8% of GDP, from 1.2% of GDP in 2013.
She said Romania’s economic program with the IMF and the European Commission is “broadly on track” and that the authorities have succeeded in implementing most of the relevant structural reforms.
Joint teams from the IMF and the European Commission arrived in Bucharest on October 22 for the first review of Romania’s progress under a EUR4 billion loan program approved earlier this year.
Following talks with its foreign creditors, the Romanian government has pledged to reduce its budget deficit to 2.2% of GDP in 2014, from 2.5% of GDP estimated this year.
In order to help reduce the deficit, but also to accommodate a planned increase in salaries and pensions, the authorities in Bucharest have announced a string of fiscal measures for 2014, including higher excise duties and new property taxes, largely in the corporate sector.
Prime Minister Victor Ponta on Monday said the government will also increase the royalty rates levied on mineral resources other than natural gas and oil in a move to boost revenues to the state budget.
Additionally, the authorities plan to levy an excise duty of EUR0.7 per liter of fuel as of 2014. The proceeds will be used to finance infrastructure projects, Ponta said.