Commission Report 2002 (Romania)

2.4. General evaluation

Romania has continued to make progress towards being a functioning market economy, for which the prospects have improved. Sustained and full implementation of planned measures together with the completion of the reform agenda should allow Romania to be able to cope with competitive pressure and market forces within the Union in the medium term.

Some significant gains on macroeconomic stabilisation have been achieved over the last years. A more appropriate policy-mix is decreasing inflation, while growth has resumed and the external position remains sustainable. Considerable progress has been made on the creation of the necessary market institutions. The ongoing overhaul of the banking sector, the successive improvements in the supervisory and regulatory framework for the financial markets and the advances in privatisation have progressively tightened enterprises financial discipline. Price and trade liberalisation coupled, over the last year, with a significant adjustment of energy tariffs and important reforms of the tax system have set the stage for a more efficient allocation of resources. Restructuring is advancing in a number of sectors.

To build upon this progress, the authorities should give priority to establishing a track record on macroeconomic stabilisation grounded on further disinflation, by maintaining an appropriate policy mix and underpinning it with the enforcement of enterprises` financial discipline. Commitments to restrict the total wage bill in the public sector should be respected. The recent sharp growth in money supply and credit requires careful monitoring and a readiness to take prompt actions. Establishing enterprises` financial discipline requires improved tax administration and compliance, a consistent and transparent implementation of the latest measures to reduce the arrears of energy users, a determined and transparent use of the recently approved legal provisions for accelerating privatisation, and a readiness to liquidate loss-making enterprises. Completing privatisation in the banking sector, continuing the reform of public expenditures and budgetary procedures, and ensuring the implementation of improved regulatory and legal frameworks would also support the establishment of a functioning market economy and the development of Romania`s capacity to cope with competitive pressure and market forces within the Union.

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