“Actions to sustainably raise the performance of many inefficient state-owned enterprises (SOEs) in the transportation and energy sectors have stalled, in part because the concept for better SOE corporate governance still has to be fully embraced. The new draft legislation on corporate governance, if comprehensively implemented, would be an opportunity to rebuild credibility in this area. At the same time, the authorities should give new impetus to private sector involvement in SOEs, through initial public offerings or strategic privatizations,” IMF mission chief for Romania Andrea Schaechter said in a press release Thursday.
The IMF official added, however, that without modernizing Romania’s public infrastructure, the benefits of the current strong economic activity could be short-lived and progress on economic convergence would be slow.
The IMF mission chief sees Romania’s near-term growth outlook as strong but risks are tilted to the downside.
“The economy is growing at a healthy clip with real GDP projected to advance by 3.4% in 2015, reflecting broad-based contributions from consumption, investment, and exports. Pro-cyclical fiscal loosening in 2016 aiming to spur domestic demand further is expected to contribute to an acceleration of economic activity to about 3.9% percent next year; however, it will also reverse recent progress on stabilizing public debt,” said Schaechter.
Romania has considerably improved its macroeconomic fundamentals in recent years, supported by three successive IMF, European Union and World Bank arrangements and it is now critical to safeguard these achievements as downside risks in the global economy, particularly for emerging economies, have heightened again, Schaechter said in a concluding statement following a visit on October 13-21 to discuss Romania’s recent economic developments and the 2016 budget plan.
Key policy priorities include preserving fiscal discipline to solidify public finances as well as renewing the momentum for structural reforms, especially as regards to state-owned enterprises, to sustain confidence and improve the long-term growth potential, she said.