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National Bank of Romania
Romania: Macroeconomic Policy Challenges
Dorina Antohi, Deputy Director
Monetary Policy and Macroeconomic
Modelling Department
The Global Financial Crisis and SEE: Lessons for macroeconomic policy and financial stability
1st Workshop on Economies of the Eastern
EuropeanBank
and Mediterranean
Countries, 14th May 2010, Athens, Greece 1
National
of Romania
Romania – basic info
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•
Location: Central & Eastern Europe
•
European Union member since 1 January 2007
•
Population: 21.5 million inhabitants as of 1 January 2009
•
Currency: Romanian leu
•
Small open economy
•
GDP per capita: 12000 (pps, 2008)
–
25100 EU 27
National Bank of Romania
2
Main structural and institutional characteristics of the economy
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•
•
•
Degree of openness: 73.9% (2008)
Share of private sector in GDP: 70.8% (2008)
Structure of GDP by sectors (2008)
Net taxes
10.6
Agriculture
6.5
Industry 22.9
Construction
10.5
Services
49.5
•
•
Banking system: majority foreign owned (88.3 % of total assets, 2008)
Monetary policy strategy and exchange rate regime: since August
2005, inflation targeting and managed float exchange rate regime
National Bank of Romania
3
Main macroeconomic developments during pre-crisis period
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•
Romania exhibited high annual economic growth between 20012008: catching-up, increased capital inflows due to improved risk
perception (EU accession, NATO membership), favourable
external context, speeded-up pace of economic and financial
integration, increased productivity, substantial credit flows,
consumption smoothing
•
After 2005-6: increasing signs of overheating, emergence and
subsequent aggravation of macroeconomic imbalances
(persistent excess of aggregate demand, widening external
deficits), also on account of increased pro-cyclicality of fiscal and
income policies
National Bank of Romania
4
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15
10
8.5
7.9
7.3
5
6.3
5.7
5.2
5.1
4.2
2.4
0
-3.3
-3.7
-5.5
-5
-5.8
-8.4
-8.6
Annual GDP gowth
-10
-10.4
-11.6
Current account deficit (% in GDP)*
-13.4
Real net wage**
-15
2000
2001
2002
2003
2004
2005
2006
2007
2008
Source: NIS, NBR
* Starting 2003, including reinvested earnings ** Deflated by CPI
National Bank of Romania
5
Trade Balance
5,500
5,000
4,500
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
0
-500
-1,000
-1,500
-2,000
-2,500
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(monthly data)
EUR million
EUR million
exports fob
imports fob
trade balance
2000
2001
2002
2003
2004
2005
2006
2007
2008
5,500
5,000
4,500
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
0
-500
-1,000
-1,500
-2,000
-2,500
2009
In Jan.- Feb. 2010, yoy growth of exports and imports was 21.8% and 6.2% respectively.
Source: National Institute of Statistics
National Bank of Romania
6
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slide
Budget deficit
ESA'95, % of GDP
-1.2
-1.2
-1.5
-2.0
-2.2
-2.5
-3.5
-4.7
-5.4
2000
2001
2002
2003
2004
2005
2006
2007
2008
Source: EUROSTAT
National Bank of Romania
7
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Public debt
ESA'95, % of GDP
25.7
24.9
22.5
21.5
18.7
15.8
2000
2001
2002
2003
2004
2005
12.4
12.6
2006
2007
13.3
2008
Source: EUROSTAT
National Bank of Romania
8
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Credit to private sector according to type of currency
- annual growth rates, real terms 120
Total
100
Denominated in fx
80
Denominated in lei
60
40
20
0
-20
-40
Sep-08
May-08
Jan-08
Sep-07
May-07
Jan-07
Sep-06
May-06
Jan-06
Sep-05
May-05
Jan-05
Sep-04
May-04
Jan-04
Sep-03
May-03
Jan-03
Sep-02
May-02
Jan-02
Sep-01
May-01
Jan-01
Sep-00
May-00
Jan-00
-60
Source: NBR
National Bank of Romania
9
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Credit to private sector according to type of clients
- annual growth rates, real terms 250
200
Total
Households
150
Companies
100
50
0
-50
Sep-08
May-08
Jan-08
Sep-07
May-07
Jan-07
Sep-06
May-06
Jan-06
Sep-05
May-05
Jan-05
Sep-04
May-04
Jan-04
Sep-03
May-03
Jan-03
Sep-02
May-02
Jan-02
Sep-01
May-01
Jan-01
Sep-00
May-00
Jan-00
-100
Source: NBR
National Bank of Romania
10
Financial depth
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45
40
M3/GDP
35
Credit to private sector/GDP
30
25
20
15
10
5
0
2000
2001
2002
2003
2004
2005
2006
2007
2008
Source: NBR, NIS
National Bank of Romania
11
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External debt on maturities and FDI
EUR million
80000
Short term debt
70000
Medium and long term debt
60000
Foreign direct investment
50000
40000
30000
20000
10000
0
2000
2001
2002
2003
2004
2005
2006
2007
2008
Source: NBR
National Bank of Romania
12
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External debt by institutional sectors
EUR million
80000
70000
60000
50000
40000
30000
20000
10000
0
2000
2001
2002
2003
Government
2004
2005
Banks
2006
2007
2008
Non-banks
Source: NBR
National Bank of Romania
13
... together with:
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Up to mid-2007:
•
continued nominal appreciation of the RON, with the exchange rate reaching an
unsustainable level (in the first part of 2007); increased risk to monetary and
financial stability (given the large share of foreign-currency-denominated loans
and liabilities in banks’ balance sheets), induced by a potential relatively sharp
subsequent correction of the exchange rate
•
ongoing disinflation process initiated in 2000
Since second half of 2007 (following the onset of global financial market turbulences):
•
starting and steepening of RON corrective depreciation
•
pick-up in inflation, also owing to the occurrence of both domestic and external
shocks (the decline of agricultural output following the severe drought, the surge
of agri-food and oil prices on external markets)
•
worsening of inflationary expectations, due to the prospects of a fiscal policy
easing and a continued lax income policy in 2008, a period with a busy election
schedule
National Bank of Romania
14
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Inflation and RON/EUR exchange rate
%
19
%
25
20
17
15
15
10
13
5
Annual CPI
11
0
9
-5
7
-10
5
-15
RON/EUR
(annual change, -apprec./+deprec., rhs)
Oct-08
Jul-08
Apr-08
Jan-08
Oct-07
Jul-07
Apr-07
Jan-07
Oct-06
Jul-06
Apr-06
Jan-06
Oct-05
Jul-05
Apr-05
Jan-05
Oct-04
Jul-04
Apr-04
Jan-04
Oct-03
Jul-03
Apr-03
-20
Jan-03
3
Source: NBR, NIS
National Bank of Romania
15
Complicated context of monetary policy implementation
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•
•
•
Implementation of IT focused on ensuring compliance with
sustainable progress of disinflation along medium-term path
described by announced annual inflation targets, while remaining
mindful of not exacerbating existing macroeconomic vulnerabilities or
creating financial stability problems whose effects might compromise
durability of secured disinflation gains
Continuous focus on slowing down speed of growth of both leu and
foreign-exchange credit (for macro as well as financial stability
reasons), using all available policy tools (interest rate policy,
management of liquidity conditions in the money market, reserve
requirements mechanism, LTV, loan-to-income limits for households,
fx exposure limits to unhedged borrowers, higher coefficients in stress
tests for exposures to non-euro credit)
Permanent message on need for maintaining consistency of the
macroeconomic policy mix (particularly avoiding pro-cyclicality of
fiscal and wage policies)
National Bank of Romania
16
Inflation Rate
50
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percent
45.7
45
40
target (Dec./Dec.)
40.7
actual (12-month average)
35
34.5
30
30.3
actual (Dec./Dec.)
25
22.5
20
17.8
15
15.3
14.1
11.9
10
9.3
5
0
27
25
22
14
9
2000
2001
2002
2003
2004
9.0
8.6
6.6
7.5
±1pp
4.87
5
±1pp
6.57
7.8
4.8
6.30
4
±1pp
3.8
±1pp
5.6
4.74
3.5
±1pp
3.5
±1pp
3,0
±1pp
2005 2006 2007 2008 2009 2010 2011
(Mar. 2009-Feb. 2010)/(Mar. 2008-Feb. 2009): 5.3%
February 2010 (yoy): 4.49%
Source: National Institute of Statistics, National Bank of Romania
National Bank of Romania
17
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Inflation rate and changes in administered and volatile prices
annual percentage change
40
Inflation rate
30
Volatile prices*
Administered prices
20
10
0
Oct-08
Jul-08
Apr-08
Jan-08
Oct-07
Jul-07
Apr-07
Jan-07
Oct-06
Jul-06
Apr-06
Jan-06
Oct-05
Jul-05
Apr-05
Jan-05
Oct-04
Jul-04
Apr-04
Jan-04
Oct-03
Jul-03
Apr-03
Jan-03
-10
* products with volatile prices: vegetables, fruit, eggs, fuels
Source: NIS, NBR calculations
National Bank of Romania
18
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NBR's key policy rates
50
45
Monetary policy rate
40
Lending facility rate
Deposit facility rate
35
Annual CPI
30
25
20
15
10
5
Oct-08
Jul-08
Apr-08
Jan-08
Oct-07
Jul-07
Apr-07
Jan-07
Oct-06
Jul-06
Apr-06
Jan-06
Oct-05
Jul-05
Apr-05
Jan-05
Oct-04
Jul-04
Apr-04
Jan-04
Oct-03
Jul-03
Apr-03
Jan-03
0
Source: NBR
National Bank of Romania
19
National Bank of Romania
Sep-08
May-08
Jan-08
Sep-07
May-07
Jan-07
Sep-06
May-06
Jan-06
Sep-05
May-05
Jan-05
Sep-04
May-04
Jan-04
Sep-03
May-03
Jan-03
Sep-02
May-02
Jan-02
Sep-01
May-01
10
Jan-01
Sep-00
May-00
Jan-00
Minimum reserve requirements
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45
40
35
30
25
20
15
FX-denominated liabilities
RON-denominated liabilities
5
0
Source: NBR
20
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Annual growth of loans to the private sector according to the type of currency
and the main administrative & prudential measures regarding lending activity
%, eop, real terms
200
175
Norms for households'
credit relaxation
(Mar.2007)
Removal of any limits on credit
institutions’ exposure from forex
loans (Jan.2007)
150
Provisioning coefficients
in relation to forex loans
extended to unhedged
borrowers (May 2008)
125
Regulations aimed at
tightening lending to
households (Oct.2008)
Regulations aimed at
slowing down consumer
and mortgage credit
growth (Feb.2004)
100
75
50
25
0
Regulations aimed at limiting fx exposure to
unhedged borrowers until 300% of CI's own
funds (Sept.2005)
Regulations aimed at tightening
eligibility criteria for households
(Aug.2005)
-25
Total
Forex
Oct-08
Jul-08
Apr-08
Jan-08
Oct-07
Jul-07
Apr-07
Jan-07
Oct-06
Jul-06
Apr-06
Jan-06
Oct-05
Jul-05
Apr-05
Jan-05
Oct-04
Jul-04
Apr-04
Jan-04
-50
Lei
Source: NBR
National Bank of Romania
21
Radical change of domestic economic developments in the
aftermath of Lehman collapse
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•
Built-up macroeconomic imbalances made the Romanian economy
extremely vulnerable in the face of global financial and economic
crisis
•
Main propagation channels of the global financial and economic crisis
to the domestic economy:
–
–
–
•
financial channel and, implicitly, exchange rate and wealth- and balancesheet- effects channel
confidence channel
foreign trade channel
Significant importance of the financial channel, stemming from banks’
reliance upon external financing, high debt service; strong impact on
lending and exchange rate
National Bank of Romania
22
Main manifestations of the impact of the global crisis
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•
•
Effects – which had started to be felt during the last quarter of 2008 –
amplified materially in 2009: (i) severe economic contraction against
the background of a steep decline in domestic demand; (ii) relative
rapid increase of unemployment rate; (iii) significant decrease of unit
labour cost in industry; (iv) stronger-than-expected adjustment of the
current account deficit (mainly via adjustment of the private sector),
due to imports having declined much faster than exports; (v) marked
weakening of lending activity
Some effects faded out during the first part of the year, while other
adjustments have been continuing, being incomplete/asymmetrical
until presently: (i) halt of the leu depreciation and subsequent quasistabilisation of the exchange rate; (ii) consolidation of disinflation with
a certain lag – given the pace of increase and amplitude of
aggregate demand deficit - also on the back of supply-side shocks;
(iii) asymmetric adjustments of labour market conditions; (iv) gradual
increase in the share of non-performing loans
National Bank of Romania
23
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Domestic Demand and Current Account Deficit
16
% of GDP, rolling basis
real annual percentage change
12
12
CAD (rhs)
domestic demand
8
16
8
GDP
4
4
0
0
-4
-4
-8
-8
-12
-12
-16
-16
I/08
II
III
IV
I/09
II
III
IV
Source: National Institute of Statistics, National Bank of Romania
National Bank of Romania
24
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ULC adjustment in manufacturing industry
annual growth rate (%)
140
130
120
110
100
90
Gross nominal wage
80
ULC
Labour productivity
Jan-10
Nov-09
Sep-09
Jul-09
May-09
Mar-09
Jan-09
Nov-08
Sep-08
Jul-08
May-08
Mar-08
Jan-08
Nov-07
Sep-07
Jul-07
May-07
Mar-07
Jan-07
70
Source: NIS
National Bank of Romania
25
Asymmetrical adjustment of labour market conditions
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Number of employees
3,900
thousand
thousand
Wage bill
annual percentage change
1,100
3,800
1,050
change
in the
pattern
of paying
the “13th
month”
wage
3,700
1,000
3,600
3,500
private
sector
80
public
sector
60
950
40
900
20
850
0
800
-20
3,400
3,300
100
private sector
public sector (rhs)
3,200
3,100
Jan.06
Jan.07
Jan.08
Jan.09
Jan.06
Jan.07
Jan.08
Jan.09
Note: seasonally-adjusted data
Source: NIS, NBR calculations
National Bank of Romania
26
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Credit to private sector according to type of currency
- annual growth rates, real terms 80
70
Total
60
Denominated in fx
50
Denominated in lei
40
30
20
10
0
-10
Jan-10
Nov-09
Sep-09
Jul-09
May-09
Mar-09
Jan-09
Nov-08
Sep-08
Jul-08
May-08
Mar-08
Jan-08
Nov-07
Sep-07
Jul-07
May-07
Mar-07
Jan-07
-20
Source: NBR
National Bank of Romania
27
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Credit to private sector according to type of clients
- annual growth rates, real terms 90
80
70
Total
60
Households
Companies
50
40
30
20
10
0
-10
Jan-10
Nov-09
Sep-09
Jul-09
May-09
Mar-09
Jan-09
Nov-08
Sep-08
Jul-08
May-08
Mar-08
Jan-08
Nov-07
Sep-07
Jul-07
May-07
Mar-07
Jan-07
-20
Source: NBR
National Bank of Romania
28
Monetary policy response since end-2008
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•
Monetary policy has been geared towards anchoring inflation
expectations and ensuring sustainability of disinflation
Monetary policy aimed to ensure prudent broad monetary
conditions at all times with regard to evolving economic
environment
Monetary policy decisions had in view:
•
•
–
–
during the first part of the interval: considerations related to the
necessity of an orderly adjustment of the external deficit and
preservation of financial stability
during the second part of the interval: the need to create favourable
conditions for a sustainable recovery of lending activity within the
Romanian economy
National Bank of Romania
29
Main monetary policy decisions
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•
•
•
Policy rate has been lowered gradually in 2009 and 2010 from 10.25%
to 6.25% (in 9 steps) on background of (i) the outlook for consolidation
of disinflation in the medium term, in line with the expected magnitude
and duration of the negative output gap, (ii) gradual decline of risk
premium and of (iii) relative persistence of core inflation over short-run:
inflation reacting with a lag to substantial economic contraction
Minimum reserve requirements ratios has been cut in several stages:
from 20% to 15% for domestic currency liabilities, from 40% to 25% for
foreign-exchange-denominated liabilities (both w. residual maturities of
up to two years), from 40% to 0 (zero)% for foreign-exchangedenominated liabilities with a residual maturity of over to years as of
the end of observance period and which are not subject to contractual
clauses
The central bank has pursued an adequate management of liquidity
conditions in the money market
National Bank of Romania
30
NBR's key policy rates and MRR ratio
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16
14
Monetary policy rate
Lending facility rate
Deposit facility rate
Annual CPI
12
10
8
6
4
2
Mar-10
Feb-10
Jan-10
Dec-09
Nov-09
Oct-09
Sep-09
Aug-09
Jul-09
Jun-09
May-09
Apr-09
Mar-09
Feb-09
Jan-09
Dec-08
0
50
MRR ratio on FX-denominated liabilities
40
MRR ratio on RON-denominated liabilities
30
20
10
0
Source: NBR
National Bank of Romania
31
Other policy responses since end-2008
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•
Despite significant economic contraction, lack of degrees of freedom
in easing fiscal, wage policies: need for a relative tightening of fiscal
policy in 2009 and for a firm fiscal consolidation starting with 2010
(pro-cyclical fiscal policy)
•
Enhanced supervision & permanent dialogue w. banks on regulatory
issues; maintaining adequate solvency levels (10% minimum)
•
Multilateral financing agreement w. EU, IMF, World Bank, other IFIs
(besides reserve build-up): restoring confidence, functioning as
“crisis management program”, enhancing stability of foreign bank
exposure to Romania & maintaining capital adequacy
National Bank of Romania
32
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Primary budget deficit and public debt
% in GDP, ESA'95
3
30
2
20
1
10
0
0
-1
-10
-2
-20
-3
-30
-4
-40
-5
Cyclical deficit
-50
Structural deficit
-6
-60
Public debt (rhs)
-7
-70
-8
-80
2006
2007
2008
2009
Source: NBR estimates
National Bank of Romania
33
Economic outlook over short and medium term
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•
Economic recovery will be delayed and slower than previously
anticipated
•
The negative outuput gap will remain significant into 2010 and
persist over the entire forecast horizon (8 quarters)
•
Annual inflation rate will converge towards the central point of
inflation targets set for end-2010 and 2011 (3.5 %±1 percentage
points and 3%±1 percentage points respectively)
•
Current account will remain at sustainable levels
National Bank of Romania
34
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Inflation Forecast
GDP Deviation Forecast
% against potential GDP
annual percentage change
6
8
Inflation targets
(Dec./Dec.)
2010: 3.5%
2011: 3.0%
7
6
3
5
0
4
3
-3
2
1
2009 T3 2010 T1 2010 T3 2011 T1 2011 T3 2012T1
annual inflation rate (end of period)
annual inflation target
variation band
-6
-9
Note: The variation band is ±1 percentage points around the
central target
2009 T3 2010 T1 2010 T3 2011 T1 2011 T3 2012T1
Source: NIS, NBR calculation
National Bank of Romania
35
Challenges for macroeconomic policy
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Lasting policies adjustments are needed to prevent a re-emergence
of macroeconomic imbalances in the future and to
restore/ensure the credibility of the overall policy framework
•
The overall challenge over the relatively near term horizon:
maintaining the macroeconomic policy mix in line with the
coordinates agreed under the multilateral external financing
arrangement with the EU, the IMF and other international
financial institutions, as well as observing the commitments
assumed under the most recent Convergence Programme
•
The general challenge over the longer term: attaining a high
degree of sustainability of economic convergence and adopting
the euro
National Bank of Romania
36
Monetary policy challenges (I)
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•
The most important challenges for monetary policy are to effectively
anchor inflation expectations and to ensure the continuation of the
disinflation process at the pace implied by the medium-term inflation
targets, and subsequently to achieve and maintain price stability and
the fulfilment of the related Maastricht inflation criterion
In the short term: these challenges arise foremost from the anticipated
administered price adjustments and likely increases in certain volatile
prices, as well as from the continued relative persistence of core
inflation, though this is clearly declining
Over the medium term: the main challenge is to firmly anchor inflation
expectations and to ensure sustainable disinflation (and
subsequently to ensure and maintain price stability) while
simultaneously creating favourable conditions for the revival of a
healthy lending activity and implicitly for a sustainable economic
recovery
National Bank of Romania
37
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Inflation and GDP gap
10
8
6
4
2
0
-2
-4
GDP gap (% against potential GDP)
-6
Annual CORE2 adjusted inflation (quarterly average)
2010T1
2009T4
2009T3
2009T2
2009T1
2008T4
2008T3
2008T2
2008T1
2007T4
2007T3
2007T2
2007T1
-8
Source: NBR calculation, NIS
National Bank of Romania
38
Monetary policy challenges (II)
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•
Setting the appropriate monetary policy stance and implementation manner
from these perspectives is still, to a certain extent, complicated by the global
financial and economic crisis-induced factors: (i) uncertainty about the level
of potential output; (ii) limitations/distortions of the monetary transmission
mechanism, which nevertheless are declining progressively in terms of both
number and intensity; (iii) uncertainties related to external economic
developments; (iv) volatility and episodic tensioning of global and/or regional
financial markets
•
Such a monetary policy setting and its efficacy is nevertheless strictly
conditional upon: (i) initiating and strengthening the fiscal consolidation and
tightening the income policy, (ii) implementing consistent structural reform
measures to ensure sufficient flexibility of product and labour markets; (iii)
ensuring the appropriate correlation between wage increases and
productivity growth; (iv) safeguarding the soundness of the banking system
National Bank of Romania
39
Fiscal policy challenges
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Short term:
Appropriate balance between fiscal consolidation & fiscal reform needed to
meet targets agreed with EU / IMF amid slow economic recovery
Medium & long term:
Convergence towards Maastricht criteria (join EMU 1st of January 2015) and
improvement of public finance quality and sustainability
Correct the excessive deficit by 2012
–
–
In July 2009, Council decided on the existence of an excessive deficit in
Romania and issued recommendations to correct that by 2011 at the latest
In February 2010, having in view sharper than anticipated contraction of
GDP in 2009 as well as effective action taken by the Romanian authorities
to comply with July recommendations, Council revised the timeframe for
the correction of deficit to 2012
National Bank of Romania
40
Fiscal consolidation measures
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Aim: reduce the deficit in 2010 to 5.9% (6.3% ESA’95) of GDP, from 7.4%
(8.3% ESA’95) in 2009, mainly via expenditure driven consolidation
Expenditure driven consolidation measures* for 2010:
•
•
•
Reduction of public sector wage bill (through a freeze on all but lowest
wages; cuts in overtime and premia; reduction in employment;
implementation of the new public wage law adopted in November
2009): 0.8% of GDP
Savings in social security expenditures (freeze on pensions - except
the minimum social pension, better control on fraudulent disability
pensions, early retirement claims, and social benefits): 0.8% of GDP
Reduction in goods and services expenditures: 0.5 % of GDP
Revenues driven consolidation measures* for 2010:
•
•
•
Turnover tax on medical distributors: 0.1% of GDP
Rompetrol bond redemption: 0.5% of GDP
Excise increase: 0.4% of GDP
2011 and 2012 deficit trajectory according to updated CP (% in GDP): 4.4%
and 3% (ESA’95)
* Compared to baseline no-measures scenario
National Bank of Romania
41
Fiscal
reformslide
measures
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Public sector wage legislation
•
Initial reform law (“unified wage law”) adopted in November 2009, specifying a unified and simplified pay scale
across the general government, reforming and capping bonuses for civil servants, setting a clear mandate to reduce
the wage bill to 7% of GDP by 2015 (from 9.5% in 2009, cash-basis);
Further steps: additional legislation - detailing the new system - to be adopted before end-September 2010, in order
to ensure compliance with best practices and EU/IMF program objectives (pay grouped by type of work
responsibility, pay benchmarked on private sector salaries, further reform of bonuses)
•
Improve fiscal governance: approval of fiscal responsibility law (setting up a medium-term budgetary
framework; introducing limits on in-year budget revisions; creating a Fiscal Council to assess official macroeconomic
and revenue forecasts and monitor compliance with the government fiscal strategy), approve legislation to mitigate
fiscal risks from local administration (development of standardised costing norms on goods and services and on
personnel spending, prohibition of the movement of resources from capital to current spending, strengthening of the
central governance oversight of local authorities by using e.g. ex-ante spending controls) – all of them in the first half
of 2010, improving the performance of SOEs and developing better monitoring mechanisms for financial results in
public enterprises
Clear the stock of payment arrears: two-thirds of the end-2009 stock of outstanding arrears to be paid in
2010 and the rest by end-April 2011, a new patient participation fee system to be set up with a view to using the
revenues to help clear arrears in health sector
Enhance the long-term sustainability of public finance:
–
–
pension reform legislation to be approved by end-June 2010 (gradually indexing pensions to inflation;
contributions to be phased-in for the excluded groups; equalizing retirement ages between men and women at
65 by 2030; reducing early retirement and improving participation rates; tightening the eligibility criterion of
disability pensions etc.)
initiating work on a comprehensive reform to develop a more streamlined and transparent, means-tested social
assistance system.
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Other fiscal
challenges
Titlupolicy
slide
•
Implementing fiscal consolidation on the expenditure side while
avoiding cuts in the productive items of the budget (expenditure on
education and research, public investment in infrastructure), with a
view to enhance long-run economic growth
•
Increasing the absorption of Structural Funds
•
Achieving the Medium Term Objective (structural deficit of 0.7% of
GDP)
•
Coping with supplementary expenditures driven by population ageing
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Titlu slide
Thank you for your attention!
National Bank of Romania
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