Romania, largest need of investments and least trained employees

Romania is top in the region, but not in a good way. Romania is the “champion” in Central and Eastern Europe at employment rate, non-performing loans, need of new investments and is the country with the least trained employees and labor taxes are the highest, believes Dan Bucsa, economist for UniCredit Bank in London.
“If we take a look at the foreign investments in the emergent countries in general, they were highly reduced since 2008 and there seems no rejuvenation,” said Busca during a seminar on economic topics, quoted by Mediafax.
He said that the institutional reforms are highly important for economic growth, as their absence will trigger no significant investments. The economist showed that the states in the region must report growths at a certain rate until they join the Euro Area so as the GDP per capita should be 75-80 percent of the level of the European Union, from 60 percent as it is now. “Romania must increase by 8 percent nominally to reach this criterion in 2025, assuming that the Euro Area develops by 3.5 percent nominally. If we assume that the Euro Area will grow only along with the inflation, that is 2 percent nominally, Romania will have to increase by 5.5 percent yearly. This is not mission impossible, but Romania is one of the states with one of the lowest growth rates in the region, compared to the Baltic states, Slovakia, Poland, etc,” added UniCredit representative in London.
The salvation still lies with EU funds
In order to compensate the direct foreign investments, the states in Central and Eastern Europe can use EU funds, saying that Romania is among the states with one of the lowest performances in funds absorption. “Romania can theoretically absorb about 36.6 percent of its GDP by the end of 2020, that is, 5 percent a year. If we add this percentage to the direct foreign investments, of 1 to 2 percent, it would become a market like any other emergent market in terms of investments,” warned the economist. He said that, ever since the crisis onset, the countries in the region remained competitive by price, through the limitation of wages, saying that the salaries in Romania were four times higher in Romania than in China in 2008, and they are now almost equal.
Decrease of workforce, another issue
Another section that Romania holds the first place in the region is the decrease of workforce, as it went down by almost 13 percent since 2000. The reasons are the higher unemployment rate and migration. “Another issue would be the latent unemployment, as 30 percent of the population are working in agriculture, and those people are hidden unemployed, they do not produce more than 10 percent of the GDP,” commented the economist. He also pointed out that, regarding the quality of the workforce, the figures reveal that Poland is the state with the best trained employees, and Romania with the worst trained. He believes that Romania should reduce labor taxes rather than the VAT, as Romania is one of the countries with the highest taxation for labour in the world.
The data in the region reveal that banking loaning in the Czech Republic, Poland and Slovakia gradually resumes and that it is still highly correlated with the level of non-performing loans, where Romania is top, with almost 23 percent.
Intermediary targets to join the Euro Area
Another topic approached during the event was joining the Euro Area. In this respect, vice-governor of the National Bank of Romania (BNR) Bogdan Olteanu, said that Romania should set certain yearly intermediary targets on various fields and reforms until it joins the Euro Area, so as to increase competitiveness, the real convergence of economy, as well as the ability to cope with the requirements. As for chairman of Bucharest Stock Exchange Lucian Anghel, he believes the target to join the Euro Area in 2019 is highly ambitious, but not impossible, supporting the vice-governor’s idea that some clear targets must be set, in several steps. He also believes Romania should not extend too much the period they remain in the ERM II, the antechamber of the Euro Area of at least two years.

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