No election year without higher wages

“Romanian prime minister to ask support from IMF for higher wages “.

Of course I am not surprised. I spoke about this here and it is the only weapon left for this government.It is odd that the news comes in the same day as IMF announces lower economic forecasts for Romania in 2012.

Higher wages and pension together with lower expected growth should give us a different deficit number than the one put forward at the last IMF mission.

Furthermore, higher deficit means higher borrowing needs for the Romanian government. NBR will  have to accommodate these growing needs and will keep rates on the very short term really low for as long as possible. Interventions to support RON will be sterilized to keep short term money market rates low. It is challenge to pull this off throughout the entire year thus I expect Ministry of Finance to try to borrow most of its needs in the first part of the year.  The second part of the year could bring the RON depreciation and higher interest rates.

But the worst will be felt in 2013. Already the dismal economic growth and high public debt are questioning the capability of Romania to pay back its foreign debt. If higher wages will be implemented in April of this year then higher taxes should be expected for 2013.


2 thoughts on “No election year without higher wages

  1. well, we are here becouse in general we export raw materials and import manufactured goods.
    Many goods that we can produce at the same price we didnt do it, it is much more interesting if on the label is write – made in china.
    This is the real problem, that we- the citizens we must resolve it.

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