The mission of the International Monetary Fund, led by Jan Kes Martin, will arrive in Bucharest on Monday to analyze the latest economic and financial developments and review the macroeconomic forecasts, writes Agerpres.

“The IMF mission headed by Jan Kes Martin will visit Bucharest from January 29 to February 1, 2024 with a scheduled visit. The Fund’s team will analyze the latest economic and financial events and update the macroeconomic forecast,” the IMF said in a statement. signed by Jeff Gottlieb, IMF Regional Representative for Central, Eastern and Southeastern Europe.

The latest visit to Bucharest by the IMF team, led by Ian Kes Martin, Head of Mission in Romania, took place from 25 September to 4 October 2023 for the annual Article IV Economic Review.

The International Monetary Fund estimates Romania’s economic growth at 2.3% in 2023 and a budget deficit of 6% of GDP and recommends additional reforms to the authorities in Bucharest amounting to 2% of GDP.

At the press conference held at the end of the consultations, Kis Martijn clarified that the fiscal package adopted by the Government last fall is a step in the right direction, but indicated that other reforms are also necessary.

“Further tax reforms are needed to increase revenues, efficiency and fairness. An increase in revenues of more than 2% of GDP beyond those brought by the last tax package will be necessary over the next two years,” the IMF points out.

At the time, IMF experts indicated that the main measures to be considered by the Bucharest authorities are: the removal of remaining exemptions, privileges and loopholes, new VAT efficiency, the introduction of a reformed real estate tax and the use of fiscal policy to promote energy efficiency and, more broadly, to promote transition to a carbon-neutral economy.

According to the quoted source, the approved fiscal package will lead to a budget deficit of 5% of GDP in 2024, but new adjustments will be needed, as the deficit should fall below 3% of GDP according to the agreement with the European Commission.

In context, IMF experts noted that the new fiscal package broadens the tax base and improves revenues by eliminating benefits for workers in agriculture, construction, food industry and IT, as well as limiting the number of goods subject to a reduced VAT rate. They also argue that raising the tax on micro-enterprises will increase tax revenue, but believe that the threshold for registering as a micro-enterprise needs to be lowered further.

On the other hand, the international financial institution has assessed that the turnover tax imposed on banks and large companies imposes an unfair burden on low-margin companies and may reduce financial intermediation.

According to the cited source, in the medium term, the Romanian economy will reach a growth potential of 3-3.25%, as consumption and investment supported by the PNRR funds remain strong. The inflation rate will decrease from 7% to 4% by the end of 2024, but remains higher than the target of the National Bank of Romania, representatives of the international financial institution emphasized.