Jeffrey Franks, IMF: Romania’s exports increase way faster than markets where it sells increase/ This means Romania is gaining market share

​Restructuring and the continuation of reforms were the main key points made by Jeffrey Franks in his speech presenting the first evaluation of the latest agreement with Romania. He confirmed information previously obtained by HotNews who wrote that the government will use a foreign HR company to bring new managers for a series of state owned companies. According to the IMF official, debts of the state owned companies increased to 4-5% of GDP.

About the Central Bank, exchange rate and commercial banks

• Inflation increased faster than expected due to an increase of international petrol prices and the prices administered in Romania In 2011 inflation might exceed 5% as estimated by the central bank  
• The central bank might readjust its policies in the upcoming months 
• Losses generated by non-performing credits continue to affect banks  
• Greek banks branches in Romania are solid and the population need not worry about them even though the danger can never be excluded 

About the liberalization of energy prices

• Prices need to be adjusted gradually and in time – first for non-household users then for households until 2015 
• The government will privatize significant shares packs of some state owned companies. Vulnerable consumers will be protected The 2011 fiscal performance looks very good, but for a decrease in social contributions, supplementary analyses are needed 

About debts to the private sector

• State owned companies have debts amounting to 4-5% of GDP  
• The first challenge is to eliminate debts 
• The new law on local finances starts to have positive effects but efforts are still needed When debts will disappear, revenues will increase and the private sector will be able to make investments 

About Romania’s economy

• There is no general major concern at the level of the IMF regarding Romania’s capacity to return its debt. 
• The debt rate in GDP terms is still small with international standards, it is manageable and we do not have to consider restructuring of debt  
• We expect to have economic growth determined initially by an increase in exports but internal demand will take the lead role during the year  
• Romania’s exports increase faster than markets it sells to increase which means Romania gains market share.  
• We talked about a decrease in social contributions and decided that we need to see more fiscal data for 2011 before making any decision. 
• Romania needs to make sure it has money for 2011 and 2012 
• I did not make important modifications in terms of estimates 
• In 2012 growth will reach 3.5- 4%  
• There are real dangers: instability in Europe can become a threat for Romania’s economy  
• High energy and raw material prices can weaken the economic recovery  
• Unemployment is high and authorities should not be tempted to slow down the rhythm of reforms  

About EU fund absorption

• We do not impose to the government any solution regarding state owned companies. 
• The government needs to bring private capital and keep majority control. 
• The private sector needs to come with money and private management  
• Low priority projects need to be abandoned 
• Romania risks to return 1.5 billion euro EU funds if it does not manage to finish pre-adhesion projects this year