A look at the debates on the Economic Commission’s report on Romania.
The European Commission’s country report on Romania points out the progress made by this country in terms of economic growth, but it warns against the risks posed by some of the measures that have lowered taxes and increased salaries. The European Commission advises the Romanian authorities to focus on three top-priority areas, namely to resume investments, to carry on structural reforms and to adopt responsible budget policies.
The document also emphasizes that limited progress has been reported in implementing the recommendations made by the Commission in last year’s report. The representative office of the European Commission in Romania and the Romanian Finance Ministry have recently organized a debate on the recent report in Bucharest. The head of the European Commission representation in Bucharest, Angela Filote, says that an analysis of the data in the report reveals that Romania ranks among the top EU member states both in terms of the economic growth rate, and in terms of the poverty rate, which, in her opinion, is a paradox:
“This tells me that the current economic growth model in Romania does not benefit citizens, because, although the national economy is growing, people remain just as poor. And this is not the kind of growth model that we encourage as a sustainable model and which fuels citizens’ aspirations for a better life.”
According to Angela Filote, one of the causes may be that, in Romania, competitiveness relies on low costs, including low wages, rather than on the high quality of products. She believes Romania needs to resume investments. On the other hand, Finance Minister Anca Dragu says investments are recovering in the private sector, while public sector investments remain both insufficient and inefficient:
“I think it is safe to say that in Romania economic growth is sustainable and is based on investment. We had a 7.5% investment growth rate in 2015 and a 5.3% increase in final consumption, therefore investments remain the engine of growth. The structure of exports has improved, particularly due to the medium and high technology exports.”
The chief economist of the National Bank of Romania Valentin Lazea believes the economic growth is reflected both in citizens’ incomes and in their savings:
“If we look at the apartments we live in, we see that the price of such an apartment was 10,000 USD in 2000. Today, the same apartment is worth 50,000 euros. So Romanians’ wealth has increased, hard as they may find it to believe. Some of them have indeed taken out higher loans than they could afford and because of that most of their incomes go into repaying those loans, but this is a separate discussion. Basically, if we look at all households, statistically, today’s level is starkly higher than what it was 10-15 years ago.”
Valentin Lazea added however that people in fact complain about the growing inequality between the richest and the poorest Romanians. He has said that, in this respect, Romania ranks first in the European Union, with a 7.2 to 1 ratio between the highest incomes and the incomes of the poorest 20% of the Romanians, which is a lot above the European average.
In an interview on Radio Romania, economic analyst Constantin Rudnitchi estimated Romania’s position among the countries with the highest economic growth rates in the EU as justified and not unexpected, but he warned that that type of economic growth, if it continued, was not entirely sound. He said the investment sector was overlooked. Constantin Rudnitchi:
“The Romanian economy has managed to grow mostly thanks to consumption. Investments have not made a substantial contribution during this period. This is not necessarily the most sound growth model, but the real problem is that this kind of growth must not continue for long periods and must not be a large-scale phenomenon. We have to be very careful as regards the way companies are treated. To mention just one example, the employees of the Dacia car-maker have demanded the construction of the Sibiu – Pitesti motorway, connecting the south to the centre of the country, which has not been built yet. If we have major investments in the economy, we should make sure that they are able to operate properly, in such a highly competitive European economy, without turning that into a privileged treatment.”
Economic analyst Constantin Rudnitchi expects Romania to have a notable economic growth rate in 2016 as well. “It may no longer be among the top 4 countries in the EU, but it will be somewhere among the top 6,” Constantin Rudnitchi concluded.