In a move to eliminate discrepancies that have built up between various beneficiaries of the state pension system, Romania’s government has approved a plan to increase pension-related spending to 142 billion lei ($35.2 billion) by 2022, from approximately 62 billion lei this year.
The plan is expected to more than double state pensions over the next four years for the country’s 5.2 million retirees, according to Reuters.
Olguta Vasilescu, Romania’s labor minister, told reporters in Budapest that the government wouldn’t introduce new taxes, or enforce any cuts to support the plan, adding that the country’s GDP would expand every year over the next four years.
Vasilescu also said the budgetary impact will be 8.4 billion lei in 2019, and that under the plan, all state pensions would increase with inflation plus 50% of the real growth in average wages after 2022. The average state pension in Romania is approximately 1,100 lei ($272) a month, which is among the lowest in Europe.
Romania reported record GDP growth of 6.9% in 2017on fiscal stimulus and strong external demand, and the government projects 5.5% growth in 2018, and 5.7% in 2019. However, the IMF’s forecast for Romania wasn’t as robust. In its most recent World Economic Outlook, the IMF downgraded its projections for GDP growth in Romania to 4% in 2018, and 3.4% in 2019, from its April forecast of 5.5% in 2018 and 3.5% in 2019.
Earlier this year, a government website published “in error” a proposal to suspend payments to Romania’s mandatory private pension pillar and direct the money to the state pension fund to help close the gap in the country’s budget. The proposal riled bond investors, according to Bloomberg News, and drove the main Budapest Stock Exchange stock index lower.
In Romania, the standard retirement age for women is 60 years and 9 months, which will rise gradually to 63 years by January 2030, while the standard retirement age for men is 65 years. The minimum contribution period is 15 years for both women and men, while the full contribution period for women is 30 years and 9 months, rising gradually to 35 years by January 2030, and the full contribution period for men is 35 years.