Romania is a middle income country with a GNI per capita of US$ 8,040 in 2009 (Atlas method). With a population of over 21 million, it is the second largest country in Central and Eastern Europe and the seventh largest among the 27 current members of the European Union (EU).
Romania joined the EU on January 1, 2007, following the completion of the negotiations in 2004 and the signing of the Accession Treaty in 2005. The prospect of becoming an EU member constituted a solid external anchor for the transformation of the country throughout its transition. Nevertheless, accession to the Union and the adoption of EU standards was neither the beginning nor the end of the integration process. The reform agenda has remained important and structural adjustment needs to continue to ensure sustained real and nominal convergence with the EU.
In 2009, after eight years of rapid economic growth and impressive gains in poverty reduction, the shockwave of the global economic and financial crisis has exposed the growing imbalances and economic vulnerabilities in Romania’s economy, rooted in a large, unfinished agenda of public sector and governance reforms.
In 2010, Romania is facing the difficult task of reconciling short-term fiscal consolidation with the need to mitigate the social costs of the crisis and restore the sources of sustainable and equitable growth. The government has moved to contain the impact of the crisis, and to resume the structural reform agenda that had faltered since EU accession on January 1, 2007. The crisis has forced fiscal adjustment measures and a re-evaluation of policies, including in public sector wages. Success in mitigating the impact of the crisis hinges on the commitment of the political establishment and the capacity of public sector institutions to work together to enact bold reforms and to mobilize key stakeholders and the population behind them.
The government has sought multilateral support, including from the IMF, the EC and the World Bank Group. The IMF, the EC, the World Bank and other IFIs have agreed to support the reforms committed to by the Romanian government with a package totaling EUR19.95 billion over the period 2009-2010. The multilateral support program aims to cushion the effects of the sharp drop in capital inflows while addressing Romania’s external and fiscal imbalances and strengthening the financial sector, and seeks to: i) strengthen fiscal policy further to reduce the government’s financing needs and improve long term fiscal sustainability; ii) maintain adequate capitalization of banks and liquidity in domestic financial markets; iii) sustainably reduce inflation; and iv) secure external financing and improve confidence.
Economy
Romania’s economic performance was remarkable in 2000-08, although important vulnerabilities remain. Romania has steadily converged in income, competitiveness and living standards towards the EU, but the gap remains large. In 2008, income per capita was around 44% of the EU 27 average. Since 2000, the government has implemented macroeconomic and structural policies which are supportive of growth and disinflation. Advances in structural reform led to improved financial discipline in the enterprise sector. Foreign Direct Investment inflows have been estimated at around 5-6% of GDP in recent years.
The Romanian economy experienced an economic boom from 2003-08, associated with the process of accession to the EU, leading to rapid gains in poverty reduction. The current crisis has forced strong austerity measures and a re-evaluation of populist policies, including in public sector wages and pensions. Success in mitigating the impact of the crisis hinges on the commitment and capacity of political institutions to work together to enact bold reforms and to mobilize key stakeholders and the population behind them. Over the medium term, a gradual economic recovery is expected, whose pace and strength will reflect the restoration and broadening of the economic reform agenda initiated before EU accession.
In 2009, following the onset of the global financial crisis in late 2008, the economy went into a major recession. The economy will continue to contract in 2010, by around 2 percent, before modestly recovering in 2011, at a +1.5 percent estimated GDP growth. For the first half of 2009, indicators (confidence, industrial production, retail sales and tax revenues) all pointed to a continued sharp drop in GDP, along with rising unemployment, as well as poverty incidence.
The Government has committed to a major fiscal adjustment program for 2009-10. The general fiscal deficit was 7.2 percent of GDP in 2009, in line with the country’s agreement with the IMF, driven by a decline in tax collection and higher expenditure. To achieve the 2010 target of 6.8 percent of GDP, Government has passed a radical austerity package, including a 25 percent cut in public wages, a VAT increase to 24 percent, and cuts in social assistance and goods and services. Government debt has increased, though relatively modest at 33 percent of GDP. Rapid decline in domestic demand helped ease inflationary pressures, but the one off effect of the VAT increase will lead to a peak in inflation in Q3 2010, estimated at around 7.5-8 percent.
The reform program supported by the IMF-EU-WBG, in the equivalent of 14-15 percent of GDP, has played a crucial role in normalizing financial conditions, reversing economic imbalances, and setting the stage for economic recovery.
The dual objective of the Bank is to support Romania in dealing with the economic and financial crisis, and to broaden and deepen the reform program for sustainable and equitable growth. A new Country Partnership Strategy (CPS) with Romania sets the rationale and framework guiding the program of the World Bank Group in Romania for 2009-2013. As the global financial crisis exerts a significant strain on the Romanian economy and society, the Strategy sets out how the World Bank Group will support Romania's efforts to restore sources of sustainable and equitable growth in order to emerge from the crisis on a stronger foothold, while reducing the immediate impact of the crisis on the poor. In the first few years of the new CPS, the Bank program will center on Advisory and Analytical Activities (AAAs) and a programmatic series of Development Policy Loans (DPLs) which will seek to support the government's goals of further EU convergence. Broadly, the CPS puts emphasis on reforming the public sector, encouraging growth and competitiveness, and promoting social inclusion.
The CPS recognizes the leading role of the EU as main partner of Romania, and the lead of the IMF in putting together the crisis-support package. At the same time, the CPS builds on the significant value-added which the Bank can bring to Romania's policy agenda, especially in the design and implementation of structural reforms. The Bank will work in areas not or insufficiently covered by EU cooperation (e.g. health, education, social protection, pensions, public administration), and can help the Government assess and design implementation of plans to achieve the acquis. The Bank will also support cross-sector integrated solutions; and can provide a global perspective on experiences with reform.
As part of the multilateral financial support agreed on with Romania to address the effects of the global economic and financial crisis and promote the reform agenda of the government, the World Bank is prepared to provide support in a proposed 3-part Development Policy Loan (DPL) program amounting to one billion Euros. The World Bank support would focus on longer-term structural issues in three key areas:
1) public sector reforms, notably in fiscal/public financial management to improve the transparency and predictability of public spending and the quality of public services; 2) strengthening social protection (social assistance and pensions) to cushion the impact of the crisis on the vulnerable and to improve the efficiency and viability of these programs; and 3) financial sector reforms to enhance the resilience and functioning of the sector.
These measures would support the country’s longer-term stabilization and economic restructuring agenda. The first Development Policy Loan (DPL1) in the amount of EUR300 million (US$423 million equivalent) was approved by the Executive Board of the Bank on July 16, 2009.
World Bank Commitments (US$ millions)
NB: Lending is per fiscal year, July 1-June 30
Portofoliul de proiecte active
Banca a jucat un rol semnificativ în România, prin contribuţia sa la restructurarea economiei, la consolidarea sectorului privat, la dobândirea calităţii de membru UE a României sau la transpunerea acquis-ului comunitar, şi la diminuarea impactului crizei. Printr-o combinaţie de împrumuturi (dezvoltare de politici şi investiţii) şi activitate analitică, Banca a contribuit atât din punct de vedere financiar, cât şi din punct de vedere intelectual la eforturile de reformare, integrare şi de diminuare a crizei.
În perioada 1991-2010, Banca Mondială a finanţat un număr de 56 proiecte în România, însumând un angajament de aproximativ 5,97 miliarde USD. La ora actuală, portofoliul finanţat de Banca Mondială constă din 12 proiecte active, cu un angajament net corespunzător de 1,034 miliarde USD, şi mai multe activităţi analitice şi de consultanţă care nu sunt legate de împrumuturi, în diverse stadii de finalizare, inclusiv Analizele Funcţionale FBS convenite cu Guvernul României şi cu UE.
Distribuţia portofoliului pe priorităţi principale este destul de bine echilibrată. Un sfert din acest portofoliu (24% din angajamentele totale) sprijină reformele din domeniul asistenţei sociale, al educaţiei şi sănătăţii, cu direcţionare pe incluziunea romilor, pe Programe de Educaţie Timpurie a Copiilor (Early Childhood Education), educaţie în materie de calculatoare pentru comunităţi şi şcoli dezavantajate din punctul de vedere al cunoaşterii, îmbunătăţirea calităţii serviciilor de sănătate dedicate mamei şi nou-născuţilor, servicii medicale de urgenţă, servicii primare de asistenţă medicală în zonele rurale. Un alt sfert (20% plus 6%) din asistenţa oferită de Bancă este dedicat operaţiunilor care contribuie la convergenţa UE în domeniul mediului (apă de consum şi ape reziduale şi directiva privind poluarea cu nitraţi) şi absorbţia fondurilor UE şi, respectiv, diminuarea riscurilor legate de cutremure şi inundaţii. 19% din finanţarea oferită de Bancă este direcţionată spre agricultură şi spre dezvoltarea sustenabilă, şi neinvazivă faţă de mediu. Două operaţiuni (16% din angajamentul total) sprijină reforma sistemului judiciar şi integrarea comunităţilor dezavantajate din punctul de vedere al cunoaşterii în economia bazată pe cunoaştere. Restul portofoliului este dedicat închiderii minelor neeconomice, de o manieră sustenabilă din punctul de vedere al mediului. (Diagrama 1) Obiectivul DPL2 (care a fost negociat şi care se aproba curând) este acela de a îmbunătăţi sustenabilitatea fiscală şi managementul finanţelor publice, consolidarea asistenţei sociale şi a protecţiei sociale, precum consolidarea sectorului financiar.
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