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SUMMARY
Political commitment to reforms has improved remarkably since the Romanian centre-right coalition government came into office in December 1996. Economic policy returned to market-based indirect tools, prices and the exchange rate were liberalized. Monetary stabilization brought inflation down, stabilized the local currency and led to a healthy accumulation of foreign currency reserves. Privatization and restructuring of major state-owned enterprises has been accelerated. Results in these fields are essential to improve efficiency and competitiveness as preconditions for lasting stability and sustained economic growth.
As opposed to IMF and Romanian government forecasts, WIIW does not expect
accelerating export-lead economic growth for the next five years. Growth
will be subject to external, structural and political constraints. Political
uncertainty can increase as the next elections draw near in late 2000 or
early 2001. The government may be tempted to increase social spending and
pursue an accommodating monetary policy which could trigger not only a
higher economic growth rate, but also an acceleration in inflation and
a high current account deficit. At the same time economic growth will be
constrained by the availability of foreign financing especially in the
years of high debt-service obligations, 1999-2000. The scenario developed
in this paper considers these circumstances and expects mounting economic
strains by around the year 2000, which must be followed by renewed stabilization.
WIIW Analytical Forecast, G. Hunya: ROMANIA 1990-2002: Stop-go
Transformation. Economic and political outlook, October 1997, 22 pp.
including 6 Tables & 1 Figure,
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