The World Bank has improved slightly its forecasts regarding the Romanian economy in the next few years
The World Bank has announced an upward adjustment of its estimates regarding the growth of the Romanian economy, with the new figures standing at 4.2% for this year, 3.6% for 2020 and 3.2% for 2021. Experts expect a slow-down in the medium-term economic growth, particularly in the context of a rise of employment rates among higher education graduates at the expense of job seekers with lower education, which is predicted to feed into rising inequality.
The World Bank also says the government will have difficulties keeping the budget deficit below 3% of GDP. The newly passed Pension Law and the planned public sector salary increases will put pressure on the consolidated budget deficit and reduce the resources for investments. The institution recommends that the government’s priorities should include reforms in public administration and state-owned companies, as well as policies addressing social and regional disparities.
The World Bank also suggests renewed efforts to reduce unemployment among youth and low-skilled workers, which will help reduce the constraints on demand and contribute to sustainable economic growth. “In the medium term, the focus of fiscal policy should be rebalanced, from increasing consumption to mobilizing investments, especially from European funds, to support sustainable convergence to the EU and social inclusion. Reforms in public administration and state-owned companies, enhancing the predictability of regulations, as well as appropriate policies for addressing social and spatial disparities should be on the government’s priority agenda,” the institution added.
Meanwhile, another World Bank report shows that nearly 40% of the Romanian emigrants are higher education graduates, and warns that this generally leads to problems in the field of skilled workforce and consequently to a slow-down of the economic growth in the countries of origin. According to the report, the share of immigrants in Europe has risen sharply over the past 4 decades, with 1 in 3 immigrants now going to Europe. Intra-regional migration is also high in Europe and Central Asia, with 80% of the people choosing to move to other countries in the same region. “Migration also raises concerns of ‘brain drain’ of skilled-labour from countries of origin, as people with more education tend to emigrate more often around the region,” the report also shows.
(translated by: Ana-Maria Popescu)