Deutsche Bank sees economic improvement

According to the annual survey drafted by Deutsche Bank, accelerating the pace of structural reforms is the key challenge for the Romanian Government in 2002.

The Deutsche Bank survey emphasises that accelerating domestic demand however has triggered a widening in the current account deficit and corrective policy action is needed.

The survey considers that the 22% inflation rate target is realistic, the budgetary deficit goal of 3% of GDP is attainable, while the 5% economic growth is optimistic.

The survey concludes that Romania is ready to accelerate the economic reform, although the progress on structural reforms has been more tentative over the past 12-18 months.

“Our central scenario, however, envisages a still benign economic environment and we believe that Romania is likely to make substantial headway in economic reforms in 2002,” reads the report.

The analysis and estimates made by the German bank are based on the agreement Romania concluded with the IMF.

The leftist Governing party PSD (Social Democratic Party), which was back in power last year, recognised that progress towards EU accession required macroeconomic and structural reforms and has agreed to a new, strict IMF programme.

The report explicitly refers to the restructuring of the energy sector, given that the intercompany arrears and arrears to the government account for approximately 45% of the GDP.

The Government’s programme negotiated with the IMF aims at increases of gas and energy prices to cost recovery levels and better debt collecting.

“The stand-by programme requires the government to establish escrow accounts into which a fixed proportion of customer payments and government subsidies will be paid. This money would then go directly to the main power and gas suppliers, by-passing the local distribution companies having poor payment records. Monthly progress reports are to be submitted to the IMF and the World Bank staff and are a structural benchmark for the programme,” the report concludes.