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October 24, 2021

The chief-economist of the National Bank of Romania, Valentin Lazea:Romania’s economy could hike 5pct per annum, yet with unpleasant, costly short-term reforms

The potential increase of Romanian economy is three percent per year; it could go up to 4 – 5pct per year, not through fiscal and monetary policies, but rather on unpleasant and costly short-term reforms with long-term effects, says the chief-economist of the National Bank of Romania (BNR, the central bank), Valentin Lazea.
‘Romania has a very good situation, macro-economically speaking, which it achieved with sacrifices, in time, in the past five years and it would be a shame to lose this hard-earned stability due to some policies with short-term horizon. (…) Potential increase is calculable, the European Commission, the International Monetary Fund are calculating it, and for Romania it is somewhere around 3pct yearly. Can we increase Romania’s potential to 5pct per year? Yes, but not through fiscal, monetary policies; rather through unpleasant, costly short-term things with long-term effects,’ Lazea explained at the Forbes CEE Forum on Tuesday.
The BNR official exemplified the reforms necessary to raise the Romanian economy’s potential, connected to the three factors that lead to a healthy, lasting growth of the economy, namely capital, labour and productivity.
To boost the capital, Lazea says a better drawing of foreign direct investments is needed, and especially channeling them to the ‘tradable’ sectors, not to the real estate, financial services or malls and shops, as it used to be in the past; also, a better absorption of the European funds, the switch of the Bucharest Stock Exchange (BVB) from border to emerging market, the boosting of the economic growth’s model on investments and exports, rather than growth through consumption, and the reactivation of the public-private partnership in major investment projects.
As for labour, he sees education as the top priority.
‘We should increase the equality of chances in education. It is inadmissible that 40pct of the children, who live in the rural areas, lack equal access to education,’ the BNR chief-economist said.
In his opinion, another important change in this respect is the healthcare reform. He hailed the Government’s decision to raise salaries in this field, but said distribution should be more focused on quality and performance.
Stimulating birth and reversing the negative trend of natural growth, policies of drawing a certain type of immigration and reverse of emigration, and therefore extending of the active life for those willing and capable to work after the retirement age, are other reforms Lazea finds necessary for the increase of the Romanian economy’s potential.
In order to increase productivity, one needs to cut the energy intensiveness of the Romanian products, to grow the yield in agriculture by consolidating the land property and involving the private sector in the farming infrastructure, to develop the transport infrastructure, to boost the research and development, with the enforcement of the results into production and to stimulate all forms of e-commerce, e-government, e-payments, Lazea concluded.

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