Performance and Risks in the European Economy
In our analysis, we take into account the legislative changes made due to both Romania’s international
agreements and to the observance of the principle of ensuring the balance between the social dynamics
and the national legislative framework.
In functional terms, Romania’s economy is a critical entity because its components (blocks) have
poorly interacted, have not interacted, or have had contrary trends.
The neo-monetary philosophy of the Washington Consensus, a major political option at the beginning
of the transition, stressed out the declutching of the symbolic economy from the real one: the measures
of macroeconomic pegging, a priority of the political decision, left the real sector to act on its own.
The domestic production of goods not only rapidly dropped, but it was affected by the dissolution of
some sectors or branches, the disappearance of products and loss of sale markets.
From the very first years of the economic transition, the economy has non-functionally layered in the
following manner: the legal inertial layer of the underground economy, the layer of the substitute
economy (arrears) and the layer of the subsistence economy.
The Romanian economy knows all the three forms of inefficiency: allocative, productive and
The feature of the weak structuring of the economy is set by adaptive expectations and is resistant to
the long term objectives, relatively high inflation, decapitalisation due to the monetary policies, the
feud around the budgets, the lack of predictability of the evolutions as a consequence of the legislative
and institutional chaos, the inconsistencies in defining the property right, the political control of public
The economic crisis, a world phenomenon that is structurally affecting the Romanian economy,
enforces the adoption of some exceptional measures that, through the efficiency and promptness of
their application, would lead to a reduction of its effects and would create the premises for the national
economy re-launch. Also, these measures must ensure the fulfilment of certain obligations resulted
from the Memorandum of Agreement concluded between the Romanian Government and the
European Commission and the Stand-By Arrangement concluded between Romanian and the
International Monetary Fund.
Growth perspective remains uncertain. The economic situation has become worse since the last
IMF evaluation in January 2010 and the team has reviewed the GDP growth prognosis from +0.8
percent to -0.5 percent. Nevertheless, the high frequency indicators sugest that the recession is moving
towards the end and the expectations are aiming at a positive growth for the remained period of time.
The unsatisfactory performance in the 1
quarter of 2010 required the adoption of
supplementary adjustment measures. The fiscal deficit target was not reached for a small margin as
well as the ceiling of the internal overdue debts. Without a supplementary adjustment the team
estimated an incresed deficit of 9.1 percent of GDP until the end of the year, as opposed to the 5.9
percent target. In order to take into account the cyclical deterioration of the economy, the IMF team
and the national authorities have agreed to reviewing the deficit target for the Stand-By Arrangement
to 6.8 percent of GDP, and the national authorities have chosen a measures’ package that includes the
expenditures’ reduction with approximately 2 percent of GDP in order to reach the new deficit target.