Reviving Romania’s Growth

What will it take for Romania to accelerate economic growth, improve competitiveness, and catch up with the rest of the European Union?

These are just some of the key questions addressed by the World Bank’s latest Country Economic Memorandum for Romania.

In formulating its suggestions of policies for medium and long term growth in the country, the Economic Memorandum draws on discussions with members of Romania’s academia, business community, trade unions, and the political establishment.

“We focus on the key sectors and the key areas where we believe that a policy agenda for the medium and long term is needed in order to accelerate economic growth and improve competitiveness,” says Senior World Bank Economist for Romania, Catalin Pauna.

According to the CEM, economic growth in Romania has already had a positive effect on the standards of living in the country, in terms of alleviating poverty.  

Such improvements can also be expected to continue, if sustained policy reform efforts are introduced in key areas, says the report.

“Here we are talking about energy, we are talking about transportation infrastructure in general, but also we are looking at the functioning of the labor markets,” says Pauna, who helped draft the CEM.

The World Bank report suggests that Romania’s growth potential is substantially larger than current figures show, and that there is a lot of value added which is currently locked in low productivity activities, particularly in the energy and transport sectors.

“Many foreign investors are interested in the energy sector because there is a huge demand for energy and also the existing capacities, particularly in energy production, are extremely old.  So there is a wide range of opportunities to make investments here,” says Otilia Nutu, an Energy Analyst with Expert Forum, a Bucharest-based Think-tank.

The report’s recommendations for key macroeconomic policies as well as reforms in energy, State-owned enterprises, public sector, transport, and labor markets, are already part of the governmental agenda,  and are being implemented together with the support of the IMF, the European Commission, the World Bank and other international institutions.

“These are policies for the medium and long term, so we should expect a gradual improvement in economic activity and in job creation, but it is going to take sustained effort to implement these polices,” says Pauna.

He also says the report shows that, with continued efforts toward implementation of policies in key areas, Romania’s economic growth can further improve – along with the lives of the people who live there.