A look ahead at economic evolutions in 2014
For the year 2014, analysts forecast the Romanian economy will grow by 1.5 to 3 percent. In its own forecast, the European Commission estimates a growth of 2.1%, considering that the domestic demand will be a more important engine than exports. The Commission has also noted that investments will pick up speed this year, supported by an improved absorption of European funds, with faster development of large infrastructure projects.
Private sector consumption will continue to be limited by the general financial situation of the population, but will improve due to better consumer confidence and higher available income, against the backdrop of a better job situation and a moderate inflation rate, the EC anticipates. Consumption in the state sector will be limited, with much needed fiscal consolidation, but at a lower pace, Commission experts estimate.
Private consumption is supposed to go up by 1.6% in 2014, while in the private sector it would go up by 1.8%. A similar forecast has been made by the IMF. As for the World Bank, it expects a 2.2% growth, but, as opposed to 2013, agriculture will no longer be a major part of it. Catalin Pauna, senior economist for the World Bank, told Radio Romania what he estimated would constitute the engines of growth this year:
“A moderate boost in consumption, and, hopefully, improved investments, probably concurrently with a robust increase in exports, because as the economic situation improves in Eurozone countries, which exports go to, we may see more and more record numbers in Romania’s exports. At the same time, we hope for a better absorption of European funds, considering that most funds for the 2007-2013 interval have already been engaged.”
Catalin Pauna said that if better economic growth was desired, which would help Romania along in its attempt to get closer to the level of development of the major EU countries, then structural reforms must continue in healthcare, education, transportation, energy, making state enterprises more efficient, and improving public administration. The latest World Bank report on the evolution of the economy in states which joined the EU after 2004 shows that the economy will further grow in those countries, but at a rather slow pace; access to loans will continue to be difficult this year as well, while unemployment will stabilize, at the present levels.
For Romania, specific challenges in this respect will be related to a better and more efficient use of European funds, but also of the public investments in general, as well as to the in-flow of foreign investments in Romania. Catalin Pauna says the measures to be taken are easy to implement, and are aimed at enhancing Romania’s attractiveness for foreign investors.
"Measures have to do with all that red tape, all that complicated way you need to follow to pay your taxes, to get permits and all sorts of licenses for constructions, for getting connected to utility networks and the like, things that in other countries have become much simpler in the meantime. These are measures that are cost-effective. I think we only have to focus more clearly to sort them out, and I believe their impact on investors is going to be a positive and important one.”
In turn, business analyst Radu Craciun says the main challenges at economic level will also be related to the political developments, given the European elections in late May and the presidential election, to be held in early November.
"First off, one such challenge for Romania would be the creation of a baseline level in terms of political stability, where in effect we’re not supposed to witness major tensions or encounter elements that are a stumbling block for Romania’s decision-making process. Economic decisions should be as immune as possible to the prospective populist tendencies that traditionally occur in Romania in election years. Another challenge would be to speed up the economic growth."
Radu Craciun believes that an economic growth rate similar to that of 2013, even if 2014 is considered a good year, is not enough to provide a better living standard for the population, and to create new jobs.
ING Bank Romania’s President Mişu Negriţoiu says sound growth and stability are in store for Romania, in the following period.
"In the years to come, Romania’s economic growth potential will stand at somewhere around 4 to 5 %, by 2020. The Inflation rate will stand at around 3% and we’re going to have a stronger national currency. I believe an appreciation of the national currency will follow, with the likelihood of adopting the Euro sometime around 2020.”
Analysts’ anticipated forecast for the currency exchange rate of the national currency the Leu against the Euro in 2014 ranges from 4.35 to 4.65 Lei for one Euro.
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