Bearing the pain of harsh economic adjustment
Overview:
Despite its relatively weak parliamentary support, the Boc government is pushing through a tough economic program with which it hopes to receive both more disbursements from the EU/IMF but also to reduce macroeconomic imbalances run up during the years of booming credit. Economic growth in Romania is lagging that of its peers in the region as a result of fiscal austerity. Inflation has risen due to the one-off effects of tax increases. However, the government hopes to reap the rewards of this painful economic adjustment in years to come. Bringing the budget deficit down will eventually allow EMU membership. Inflation will probably fall sharply next year due to positive base effects. GDP growth will most likely turn positive. Nevertheless, it will be very difficult for the PD-L to stay in office given its present unpopularity.