World Bank: Keep salaries and pensions under control, to avoid hard landingPublish date: 20-07-2009
Romania's economy can avoid the risk of a hard landing by adopting a fiscal responsibility law, creating an independent fiscal council, approving in Parliament an efficient medium-term strategy, with budget spending and staff ceilings for the coming three years, according to the Partnership Strategy for 2009-2013, developed for Romania by the World Bank.
"Over the past few years, the fiscal and revenue policies implemented by Romania were, mostly, procyclical and led to imbalances and vulnerabilities which are no longer sustainable, in the context of a low progress in modernizing the public sector, as well as the worsening of global economic conditions," the document signed by the World Bank writes.
The financial institution says that, in 2010, the rise in the salary bill in the public sector should be below the inflation rate. At present, personnel expenses estimated for 2009 are of some 7.8 percent of gross domestic product, while the inflation rate is expected to be 4.4 percent. Furthermore, the World Bank recommends that Romania maintains the pension budget deficit at one percent of GDP or identify financing sources in case "the deficit widens temporarily, as a result of justified policies."
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