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June 26, 2022

Governments come and go, economy goes its way

On Monday, the day after the first round of the presidential election, the exchange rate of the national currency against the main foreign currencies remained almost stable. Not only that, but the local currency recorded a slight appreciation both against the European single currency and the US dollar. The fact cannot pass unnoticed as almost all similar events on the Romanian political stage would always send ‘seismic waves’ into the forex market and turn the Romanian leu [lion in English] into a poor financial mongrel, to quote some of the more nonconformist analysts. We insist: such thing cannot pass unnoticed, because in the last few months the Romanian society has almost lost its compass, be it because of the endless quarrel among the main political actors or because of the National Anti-corruption Department has been racing its engines as if our society had been invaded by hordes or criminals and tax evaders.

Not least, because none of the candidates to the supreme magistracy of the country was able to present something of what we would have liked to see on the social and political stage in the coming years.
The exchange rate of the local currency on the forex market is a very telling barometer. Its stability suggests a business environment that has developed immunity to the political battle of parties or politicians.
Coincidentally or not, on the first day after the first round of the presidential election, the central bank announced a rise in the forex reserves by over EUR 1 bn, while the gold reserves stay at the level preferred by BNR or cca 103 tons.
The immunity Romanian economy has developed to the political turmoil that is currently developing on more than one front reminds of the Italy of 1970s-1980s, when, while the government instability was amazing the entire world, companies – be they small, family-run or of continental size – were carrying out their business as usually without minding the politicians. It is in that context that Italy experienced its post-War economic ‘miracle’.
Although in Romania we cannot speak of a miracle in the economic field, we nonetheless observe that business is getting healthier after the pseudo-crisis declared by the Bucharest authorities back in 2010 in order to take out a burdening loan from the IMF.
In 2013, Romania had 3.5% economic growth, the best performance in the entire European Union. In 2014, economic growth will be between 2.8 and 3%. Economy’s engines are running almost smoothly. First of all for export, which, with a monthly growth rate of 6-7%, will amount to a total of EUR 50 bn this year, the highest level in the entire Romanian history. Another ‘engine’ that has been put into service this year is the domestic consumption. It is, of course’, an inspired ‘move’ of the Government who provided a rising income trend as well as price stability in the context of a low inflation and positive circumstances on the global hydrocarbon market.
If the two elements named above had been backed by an adequate volume of public and private investment, would have been able to speak of a much more positive economic landscape in Romania. Unfortunately, this is where either incompetence or the poor coordination of the various compartments of the administration steps in. In an economy that strives to bridge a divide it is unconceivable to end the year with projects sitting in drawers and lamentation during Cabinet meetings. The demand in the sector of investment are some of the most diverse, ranging from the road infrastructure that makes this country marginal on the European stage to the remodelling of residential buildings from the point of view of energy efficiency. There is no excuse. The only possible explanation is the lack of interest and, of course, the inability to spend European funds. Although a special ministry has been created in the Government structure – the Ministry of European Funds – all it has been able to show so far was its impotence. All the relevant minister has been able to do was make promises. Eventually, the official ‘reassures’ us that 80 % of the total allocations made available to Romania in the 2007-2013 financial period will be used. Not less! What a shameful piece of news, knowing that this country needs money as a person needs oxygen! All in vain. The inability to spend EU funds comes in a tandem with the policy of sitting on available national budget resources. We are probably among the very few countries in the world that report a surplus of ‘deficit’ in the budget execution in the first nine months of the year. Although we were entitled to 2.2% of GDP deficit, the Romanian Government is preparing itself for the announcement of a tiny one. As tiny as the authorities’ concern about improving the living conditions of people living in Romanian cities, of people living in our patriarchal villages, rural and urban amenities, road and rail infrastructures. Plus a myriad of other sectors that would have desperately needed the money. Money the Government did not know how to spend.
For all the shortcomings mentioned at the previous paragraph, the Government has to be harshly reprimanded, also in order for the in-coming Government to be warned.
Governments come and go, but the economy has to go its way. It has to work not just smoothly, but at parameters that would make us able to recover the delay compared to the average in the European Union. That will take not just a few measures designed to encourage the private business environment, but a lot more competence and effort. And the right persons in the right place.

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