Romania’s macroeconomic performance was best of the entire transition period in 2002, reads the Strategy for the management of the government public debt over the interval 2008 – 2010, posted on the webpage of the Ministry of Economy and Finance (MEF).
According to the document, in 2002, the monetary policy focused on reducing inflation and the tax policy was aimed at keeping the general budget deficit under control (2.6 pct of the GDP) and finance it mainly from foreign sources (the equivalent of 1.4 pct of the GDP), taking into account the spread between the yields of government stock placed on the domestic market and interest rates for foreign loans.
The financing of the budget deficit mainly from foreign sources diminished the Finance Ministry’s dependence on domestic government stock. The yield of government stock with a three month maturity decreased from 35.1 pct to 17.6 pct and the annualised average yield for government stock dropped from 35.4 pct to 16.9 pct getting, closer to interest rates on the interbank market and to the benchmark interest rate of the National Bank of Romania (BNR).
The disinflation trend continued in 2003 for the fourth year in a row, with the December-to-December inflation rating getting 14.1 pct. Also in 2003, BNR decided to shift to the euro as reference for the currency policy, a decision justified by the share of commercial transactions performed in this currency, the currency structure of the foreign debt and the requirements of the EU accession process.
In 2004 Romania had the best performance of the entire transition period in terms of economic growth, with the GDP dynamics (8.3 pct) by 3.1 pct percent higher than the figure attained in 2003 and by 2.8 pct above the initial goal.
The Romanian government’s policy to cut the budget deficit, similar the previous year, helped temper down inflation in 2005 (December to December inflation dropped to 8.6 pct), restricting at the same time the further decline of the current account deficit.
September 2006 marked the end of the liberalization of the capital account, which paved the way towards a stronger integration of national economy with global financial flows, but also rendered macroeconomic policies more complicated.
In 2006, activity on the government stock market was the lowest in recent years because of the absence of government stock on the primary market. Even though tax policies relaxed in 2006, resulting in a rise of the general budget to 1.7 pct of the GDP from 0.8 pct thereof in 2005, this happened towards the end of the year, whilst the budget execution remained asymmetric.
The negotiable public government debt (government stock) decreased steadily from 32 pct in 2004 to 18.4 pct in 2006, with loans accounting for the difference.