The need for a new economic growth model

According to experts with the European Bank for Reconstruction and Development (EBRD), Romania needs a new economic growth model.

Leyla Cheamil, 13.06.2018, 13:31

According to the
latest report on transition, drawn up by experts with the European Bank for
Reconstruction and Development, Romania needs a new economic growth model,
based on innovation, in order to be able to catch up the developed countries in
the West. The report was presented on Tuesday at a conference held at the
headquarters of the Romanian Central Bank.

The regional EBRD
director Matteo Patrone said that the GDP has been growing above its potential,
based on consumption and salary increases, without being correlated with an
increase in the country’s productivity. To accelerate on the convergence path,
Romania, like many other countries in the region, needs a new growth model
based on innovation and integration in the global value chain, Matteo Patrone
also said, while also voicing his conviction that Romania is on the right path,
due in particular to its human resources and high technology, in fields such as
the IT and the aerospace industry. Still, as the EBRD director also stressed,
many ingredients are still missing or need to be supported, in terms of
structural reforms. Patrone believes that infrastructure is a crucial
ingredient, as it stimulates social inclusion and geographical integration,
increases productivity and paves the way for trade and foreign direct
investments in the country.

According to the
EBRD official, within the next five years, the need for infrastructure
investment in the region will have reached 40% of the total investment
required, accounting for 1.9 billion Euros. He also referred to Romania’s
motorway network, saying that with its only 747 km, Romania ranks quite low as
compared to other countries in the region in terms of infrastructure network
density and geographic expansion. Still, as Matteo Patrone stated, there are
sectors where progress has been made, such as water and energy, pointing at the
interconnection of the Romanian gas network with those of Bulgaria and Hungary.

The chief economist
of the Romanian Central Bank Valentin Lazea, who attended the presentation of
the EBRD report, said that a country cannot expect a high rate of economic
growth indefinitely if it’s a democracy and doesn’t make the necessary
structural reforms. Valentin Lazea drew attention to the fact that one of the
costs of democracy is that decisions are made at a slower pace, things take
longer and the growth is not as high as in dictatorial regimes. He mentioned a
few issues that Romania is still faced with and needs to resolve, such as the
gaps existing between regions, between youth and the elderly in terms of access
to the labour market and between men and women as regards salaries.