Fast growth in GDP, investment and exports
Romania is in its best shape, economically, for a decade. With the budget deficit under control and employment growing, the prospects look bright, argued Anca Dragu, Minister of Public Finance, at an event in Bucharest organised by the ministry and GlobalCapital. The government is striving to make the public finances more transparent, with granular details of spending and revenue published online, and is trying to simplify taxation and cut red tape. Risks include Brexit, domestic demand outstripping supply and bottlenecks slowing down the process of reform and investment.
When we look at the dashboard of the Romanian economy, we see that it is resilient to shocks and the figures are looking fine.
We had 5.2% growth in the first semester of 2016, the highest in Europe, and investment growth of 7.4%. Foreign direct investment in the first eight months of 2016 was €2.7bn, the highest level since the crisis.
Exports have risen by 6.6% in the first eight months. We have new job creation, 3.4% in the first eight months, while wages have increased by almost 13%.
We have issued public debt at our lowest interest rate. Of course, our public debt is at a very comfortable level, only 40% of GDP, but we want to stay there, even to consolidate.
So the Romanian economy is now in the most favourable situation for the past decade. We have sound and sustainable growth, based on a positive contribution from all economic sectors, especially investment.
Speeding up investment
We hope to see an accelerated process of investment, for many reasons. Romania enjoys political, economic and monetary stability. We have a privileged geographical location, being the gateway to the European Union, and a Black Sea harbour.
We have an attractive fiscal environment and a generous package of incentives for research and development, and for IT. We also have support schemes for investment, and of course a stable exchange rate.
This year was full of challenges, but also a year full of achievements. We have shown that we can keep the budget deficit under control in an election year and lay the foundations for irreversible reforms.
Macro-economic imbalances have been closed, according to the European Commission.
We have created the largest online budget platform in Europe. With just one click, any citizen can learn about the expenditures and revenues of almost 14,000 public institutions and over 200 state-owned enterprises. On top of this, we will soon add non-governmental organisations that are financed from public money.
We have embarked on the largest simplification and red tape reduction process in tax administration. We are now launching for public debate a second package of measures, intended to support taxpayers.
Putting the state’s house in order
Important progress has been made on implementing corporate governance in the institutions under the Ministry of Public Finance.
The selection of a professional board and management for CEC Bank, the state bank, have been started, and will continue, with other companies under the Ministry of Public Finance.
We have also enhanced the legal base and taken important steps in the field of investment prioritisation and increasing public spending efficiency. We have first draft reports for the ministries of Transport, Health and the Environment.
Important reforms have been conducted that are creating the foundations for sustainable growth.
Forecasts indicate economic growth of around, or even above, 4% for the medium term, and investment growth of over 7%. Exports by 2020 should increase at an annual average rate of 9%.
Of course, there are also risks and we do not overlook them, both internal and external. We see a moderate risk related to Brexit, and also from lower than expected growth in the main economic partners of Romania. Another risk is the proximity of our country to conflict areas.
For internal risks we see domestic demand much higher than the domestic supply, and another risk may be delays in implementing structural reforms and bottlenecks in financing investment projects.
For all these reasons, we consider that we have laid the foundations for strong growth and taken proactive measures to limit these risks.
To improve the possibility of financing important projects we are working on setting up a development bank and we are benefiting from the expertise of KfW.
For all these reasons, the presence of investors, with projects they want to develop in Romania, is important. They will contribute to better sustainable growth, higher integration and more rapid convergence.