March 17 (SeeNews) - The International Monetary Fund (IMF) mission chief for Romania, Reza Baqir, has urged the country to reconsider its economic policy trend of recent years, particularly because its current fiscal framework is worrisome, according to a press release from the Romanian president's office.
The IMF mission chief has stressed that the current fiscal framework poses a number of risks and vulnerabilities, the president's office said in the press release issued on Thursday following a meeting with president Klaus Iohannis at which the mission presented the conclusions of its visit.
During the meeting, Reza Baqir stressed the need for Romania to rethink its economic policy trend of recent years which was mainly focused on encouraging strong consumption rather than supporting investments and production. In this regard, the IMF said that Romania needs to improve the absorption of EU funds, significantly boost budget revenue collection, provide predictability and further support the fight against corruption, according to the press release.
For his part, the Romanian president noted the importance of increasing the investors' confidence in the Romanian economy through credible public policies, efficient and transparent public spending and competitive business environment.
Romania's economy is expected to grow by 3.8% in 2017, according to the IMF's latest economic forecast issued in October last year.
Romania's 2017 budget bill is built on projections of 5.2% economic growth and sets deficit equivalent to 2.99% of GDP, a target that many find too ambitious.
In 2016, Romania's economy expanded by 4.8% year-on-year compared to a revised growth rate of 3.9% in 2015. The country's consolidated budget showed a deficit equivalent to 2.41% of the projected GDP last year, compared to 1.47% of GDP in 2015, according to finance ministry data.
Among the fiscal easing measures that have entered into force since the beginning of the year is a law doing away with health and social insurance contributions paid by pensioners and scrapping income tax on pensions under 2,000 lei ($469/443 euro), a bill eliminating 102 fees and charges, and a hike of the minimum wage by 16% to 1,450 lei.
Romania also reduced its VAT rate from 20% to 19% as of January 1. This cut follows a reduction in the VAT rate from 24% to 20% in 2016.
According to the latest forecast of the European Commission, Romania's economy will grow by a real 4.4%, while the World Bank predicts 3.7% growth.
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