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March 29, 2023

Romania unlikely to join eurozone at current economic growth

For 2014 the Association of Financial-Banking Analysts foresees a slowdown of economic growth to 2 pc, compared to an estimated value of 2.4 pc this year.
The current economic growth rhythm of approximately 2 per cent (of potential GDP) does not give Romania the possibility of catching up with the Euro Area, this being equivalent to the impossibility of ever adopting the European single currency, Ionut Dumitru, Raiffeisen’s chief economist and president of the Fiscal Council, stated at an event organized by the Association of Financial-Banking Analysts in Romania (AAFBR) with the support of the National Bank of Romania (BNR), CApital.ro informs. “Only an economic growth of 3-4 per cent would ensure a real convergence within a reasonable time, but in order to attain it there is mandatory need to attract foreign direct investments,” he explained. But in order to attract these foreign investments a great deal of work has to be done on structural reforms and we need fiscal and governmental coherence, Dumitru opined. In his turn, BNR’s chief economist Valentin Lazea pointed out that Romania cannot join the Euro Area and remain competitive while having 3 million subsistence farmers. “Romania is positioned very poorly not just compared to the Euro Area but even compared to regional countries when it comes to competitiveness. We are faring very poorly at the level of institutional competitiveness, extremely bad when it comes to infrastructure competitiveness and very poorly when it comes to tax competitiveness, although apparently we have one of the smallest profit taxes,” Raiffeisen’s chief economist explained.
According to a poll conducted by the AAFBR, Romania will most likely join the Euro Area in 2012, and a hastening of the process will not lead to joining the Euro Area anytime sooner than 2018, the economic analysts consider. Reducing the development gaps between Romania and the Euro Area countries represents a major challenge for the following years, in the opinion of many of the analysts who took part in the poll.
For 2014 the analysts see a possible slowdown of economic growth to 2 per cent, compared to an estimated value of 2.4 per cent for this year. The opinions concerning next year’s evolution however vary a lot, the interval ranging from 1.5 to 3 per cent. According to the analysts consulted, the inflation rate could rise to 3.1 per cent in December 2014, up from a forecast level of 2 per cent in December 2013.
The estimate concerning the RON/EUR exchange rate is of 4.45 units in December 2013 and 4.5 units in December 2014. The analysts’ forecasts for December 2014 vary from RON 4.1/EUR to RON 4.7/EUR.
Also, Romania’s economic growth will stand at 3 percent in 2013, but without the contribution of agriculture it would only account for 1.4-1.5 percent, Fiscal Council President Ionut Dumitru stated on Wednesday.
Libocor (BRD): Romania does not fully respect real convergence criteria
Romania does not really respect the long term interest rates criterion, Florian Libocor, BRD’s chief economist, stated. “Likewise, if we evaluate the Romanian economy from the point of view of real convergence criteria we can notice that notable progress was made, however the gaps between us and the other EU economies point to Romania’s failure to fully respect these competitiveness and productivity criteria,” Florian Libocor stated at the same conference. In what concerns possible solutions, he said that three key elements can be mentioned: labor productivity, competitiveness and structural reforms.

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