The IMF has issued a report stating their preliminary findings on the conclusion of a visit to Romania for discussions on the economic situation. The report notes that the Romanian economy has pursued sound economic policies and corrected internal and external imbalances although weak public infrastructure is a bottleneck to higher growth. The IMF considers that Romania needs to boost the efficiency of public spending, go ahead with delayed reforms to state-owned enterprises and resolve problems remaining from the crisis in the financial sector.

The IMF is expecting the Romanian economy to grow by 2.7% in 2015 and 2.9% in 2016 with private consumption as the main driver of growth. There are downside risks to the economy such as volatility in global financial markets and slow growth in the Euro area. Romania should make full use of EU funds to improve the quality of infrastructure which could boost growth by a further 0.5% annually in the medium term.

The fiscal deficit has been brought down to 1.9% of GDP in 2014, mainly as a result of expenditure cuts. Pressures exist to increase government spending, especially spending to improve infrastructure. There is also pressure for more age-related social spending. Fiscal structural reforms are expected to be important in consolidating the fiscal adjustment. Revenue mobilization is still considered to be inadequate although there have been efforts to improve the tax administration. The IMF considers that until reforms of the health sector are carried out and health spending has expanded there will be no further room to lower tax rates.

Encouragement of high labor participation in the market is also important for medium term growth. The IMF recommends a focus on young, low-skilled women and the implementation of training programs combined with wage competitiveness. The tax wedge for low income earners should be lowered to encourage these earners to enter or stay in the labor market. This could be done by specific tax measures that could be financed by broadening the tax base.