International climate and high foreign deficit make Romania vulnerable

The international financial markets are more tense than at the beginning of the year, and Romania’s foreign deficit is rising above initial estimates – all the more reason to take appropriate macroeconomic steps in order to reduce Romania’s vulnerability, says Juan Fernandez Ansola, IMF resident representative for Romania and Bulgaria. “The fiscal policy and the 2008 budget will have to be at the centre of these appropriate policies. Also, the NBR (National Bank of Romania) needs to very carefully consider how it will continue its monetary policy, after inflation in August climbed close to the upper level of the inflation limit,” said Ansola, speaking ahead of the IMF mission, which will visit Bucharest next week to assess the macroeconomic situation and how the policies are being implemented. The visit is a part of the standard talks the IMF holds with member countries, and will concentrate on the 2008 draft budget and on the fiscal and wage policies. Ansola warns that the current international financial climate is increasing Romania’s vulnerability, given its “rather heavy” dependence on capital inflows to finance its external deficit and cover investments. “Romania is indirectly affected by the “subprime crisis” in terms of the capital account in its balance of payments. It is a question of maintaining the credibility of macroeconomic policies, and also Romania’s credibility, so as to keep investments flowing in”, added Ansola.