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September 28, 2020
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Will Romania Ask for an IMF Deal?

If an external observer watched the Romanian officials declarations, he would notice the opinions are drastically divided. On one side we have the Romanian Government, which despite the 10% drop in Q1 y/y, shows a unrealistic optimism for the evolution of the economy. On the other side we have bankers, economists and financial analysts who warn that the Government should take different financial measures if Romania wants to avoid a catastrophe.

The possibility for an IMF deal was first brought to the general public during the pandemic, when the economic crisis ahead starting looking frightening enough even for the optimistic Romanian Government. Yet, despite the evidence, the officials strongly rejected the idea and hoped for a V-shaped recovery of the economy.

The Romanian minister of Finance boasted with this V-shaped recovery immediately after the consumption grew up again. Also, the PM Ludovic Orban clearly declared Romania didn’t need a deal with the IMF. He even named this rumor as being far fetched.

Still, Ionut Dumitru, chief economist at Raiffeisen Bank, told Ziarul Financiar, the most prestigious Romanian financial publication, that a deal with the IMF would be the only solution for Romania if the populist measures, such as the increase of the pensions and the doubling of the child allotment, are approved.

According to his opinion, the financial deficit could be 9% at the end of this year, but also could reach 12% if the pensions, the allotments and the salaries are increased this year.

Will Romania ask for a new deal with the IMF? At the moment there is no sign for the Government to do that. Yet, if the Parliament increases the revenues for some categories, then the deficit will skyrocket and the IMF could be a solution.

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