It said the potential effects enhancing excess demand in the economy, generating inflationary pressures, will essentially depend on the final form of the wage bill and the gradual implementation of wage raises in the public sector.
Reductions in public investment, to keep in line with the EU budget deficit limit of 3% of gross domestic product, coupled with a wider gap between wage variation and labor productivity would eventually impact the Romanian economy’s growth and competitiveness potential.
This would hurt foreign investors’ risk perceptions, affecting stable capital flows into the Romanian economy, posing risks to financing the current account deficit and the future evolution of the leu currency, the central bank said in its report.