Changes

Financial and technical assistance continues to flow from the U.S., European Union, other industrial nations, and international financial institutions facilitating Romania's reintegration into the world economy. The International Monetary Fund, World Bank (IBRD), the European Bank for Reconstruction and Development (EBRD), and the U.S. Agency for International Development (USAID) all have programs and resident representatives in Romania, although USAID programs will phase out at the end of 2007. As of August 2007, Romania had attracted $21.8 billion in foreign direct investment. Of this total, U.S. direct investment accounted for $915.7 million (4.9%), ranking sixth among national investors but first among non-EU countries.  

Financial and technical assistance continues to flow from the U.S., European Union, other industrial nations, and international financial institutions facilitating Romania's reintegration into the world economy. The International Monetary Fund, World Bank (IBRD), the European Bank for Reconstruction and Development (EBRD), and the U.S. Agency for International Development (USAID) all have programs and resident representatives in Romania, although USAID programs will phase out at the end of 2007. As of August 2007, Romania had attracted $21.8 billion in foreign direct investment. Of this total, U.S. direct investment accounted for $915.7 million (4.9%), ranking sixth among national investors but first among non-EU countries.  

After years of IMF-guided economic reforms, Romania' stand-by agreement with the IMF expired on July 7, 2006. Romania's inflation rate has steadily decreased, while growth rates have been between 4% and 8% since 2001. However, the IMF has been critical of Romania's 2005 adoption of a 16% flat tax, pointing to the country's low rate of tax collection as a medium- to long-term impediment to growth. The IMF has also criticized Romania's public sector wage policy as inflationary. Public sector wages increased 36% through 2006 and the Government of Romania has approved public sector wage increases of 14%-19% over three rounds in 2007. Analysts have warned about increasing macroeconomic imbalances, such as the growing current account deficit (10.3% of GDP in 2006 and possibly reaching 15% in 2007, the IMF estimates). This along with deteriorating education and health services, aging and inadequate physical infrastructure, and a looming real estate price bubble are all seen as threats to future growth.  

After years of IMF-guided economic reforms, Romania' stand-by agreement with the IMF expired on July 7, 2006. Romania's inflation rate has steadily decreased, while growth rates have been between 4% and 8% since 2001. However, the IMF has been critical of Romania's 2005 adoption of a 16% flat tax, pointing to the country's low rate of tax collection as a medium- to long-term impediment to growth. The IMF has also criticized Romania's public sector wage policy as inflationary. Public sector wages increased 36% through 2006 and the Government of Romania has approved public sector wage increases of 14%-19% over three rounds in 2007. Analysts have warned about increasing macroeconomic imbalances, such as the growing current account deficit (10.3% of GDP in 2006 and possibly reaching 15% in 2007, the IMF estimates). This along with deteriorating education and health services, aging and inadequate physical infrastructure, and a looming real estate price [[economic bubble|bubble]] are all seen as threats to future growth.  

Romania's budget deficits also dropped under IMF guidance, though the trend is reversing. Actual deficits decreased from 4% of GDP in 1999 to only 0.8% in 2005 and 1.7% in 2006. However, the 2007 deficit is expected to approach 3%, driven by rising spending on infrastructure, public sector wages, and pension increases. In response the IMF has recommended that Romania strive to keep the 2007 deficit below 2%, dropping to 1% of GDP in 2008. The IMF also advises that Romania is lacking a realistic fiscal policy framework for the medium term. The country made progress in combating domestic tax arrears and expanding the tax base in 2005, though Romania has one of the lowest collection rates in Europe, at 31.0% of GDP in 2006.  

Romania's budget deficits also dropped under IMF guidance, though the trend is reversing. Actual deficits decreased from 4% of GDP in 1999 to only 0.8% in 2005 and 1.7% in 2006. However, the 2007 deficit is expected to approach 3%, driven by rising spending on infrastructure, public sector wages, and pension increases. In response the IMF has recommended that Romania strive to keep the 2007 deficit below 2%, dropping to 1% of GDP in 2008. The IMF also advises that Romania is lacking a realistic fiscal policy framework for the medium term. The country made progress in combating domestic tax arrears and expanding the tax base in 2005, though Romania has one of the lowest collection rates in Europe, at 31.0% of GDP in 2006.