‘As budget expenditures increased 5 pct for salaries and pensions alone, the budget adjustment will be necessary indeed, but it will not equally affect everybody, because not all Romanians are public employees or pensioners, but the living standards of certain individuals put the state budget under strain,’ explained the BNR chief economist.
The unsustainable external debt and the huge budget deficits are among the vulnerabilities of Romanian economy that rendered it even more crisis-sensitive, said Valentin Lazea. He added that if calculated with the EU methodology, Romania’s budget deficit is 5.5 percent, not 4.6 percent, as the IMF considers.
The BNR chief economist also explained that the central bank cannot switch to the floating exchange rate because this would result in the increase of the exchange rate following capital inflows.
Valentin Lazea also pointed the finger to the wage policy under which salaries increased at a rate higher than the 10 percent labor productivity and widened the current account deficit to over 12 percent; the deficit has meanwhile narrowed to about 5 percent again.
According to the BNR chief economist, among the channels through which the global crisis seeped into Romania are foreign trade (shrinking foreign markets), the financial channel (reduced access to loans and financing from the external market), the exchange rate, the investors’ distrust in the Romanian economy and the change of balances following property devaluation.