ING Bank report: Romania could double its GDP in the next ten years

Romania could enter the top 10 economies in the European Union (EU), and in the next ten years the Gross Domestic Product (GDP) could reach 700 billion euros, thirty times more than in 1994, according to the forecasts of ING Bank Romania.

“A GDP of 700 billion euros in 2034 would probably put us in close competition with – most likely – Austria for entering the top ten economies in the European Union. We believe it is a plausible scenario that can materialize with a normal growth rate, without overheating the economy,” the ING report states.
The report entitled “30 x 30. 30 years of transformations. 30 years of ING” shows that, in the next decade, Romania’s average economic growth rate will be between 3% and 3.5% per year, as well as a similar average inflation. The specialists specify that one of the conditions for these estimates to be fulfilled is the efficient absorption and use, in the coming years, of the 28 billion euros available through the National Recovery and Resilience Plan (PNRR).
“In 1994 Romania’s GDP was about 26.6 billion euro (or more precisely ECU – European Currency Unit, the euro being introduced five years later; for simplicity we will use the name euro for the period when technically there was only the ECU), more than three times smaller than Portugal’s. In 2024 Romania’s GDP will reach almost €357bn, almost 30% higher than Portugal’s.
Romania’s economy has undergone a profound transformation over the last thirty years as it has moved from a post- communist economy to one of the most dynamic economies in Europe. This could not have happened without profound structural changes, foreign investment and, above all, accession to the European Union,” says the report, signed by Valentin Tătaru, Chief Economist, ING Romania.
Romania’s GDP is forecast to reach almost €360 billion in 2024, with potential growth stabilizing at around 3.0%-3.5% for the following years.
The economy is going through a phase of structural transformations due, on the one hand, to the advancement of public investments (largely supported by European funding) and, on the other hand, to the requirements of the transition to a green economy – also closely linked to the objectives of the European Union and with significant European funds channeled in this direction.
According to the ING Bank’s chief economist, Romania’s medium and long-term future seems to be strongly linked to how the country (and especially the political class) will manage a short-term challenge: full and efficient implementation of NRRP.
“There are about 28 billion euro to be attracted up to and including 2026, money that spent efficiently could mean a major leap towards modernizing the country in terms of the major components of physical and digital infrastructure, human capital, etc.
In addition to the money from the NRRP, Romania still has around €45 billion available for the 2021-2027 financial framework. This is possibly the last such generous allocation that Romania will benefit from, with future allocations likely to be influenced by the possible accession of new members to the Union and/or by the fact that Romania will already have come quite close to the European average with various indicators, making the cohesion funds less relevant,” the report says.
In conclusion, the report forecasts that Romania’s future in 2034 will be strongly influenced by the way in which European funds will be absorbed and used in the next 3-4 years.
“Assuming real GDP growth of 3.0%-3.5% and a similar average inflation, Romania’s economy could double in the next 10 years, with nominal GDP exceeding €700 billion in 2034. A GDP of €700 billion in 2034 would probably put us in close competition with – most likely – Austria for a place in the top ten economies in the European Union. We believe this is a plausible scenario that can materialize at a normal growth rate without overheating the economy.
On a sectoral level, we anticipate that sectors that until recently enjoyed rapid growth, such as IT, construction or automotive, will mature and naturally take a central role in the economy, alongside emerging sectors such as renewable energy. Related to the latter, a reasonable projection for 2034 is that about half of gross final energy consumption will come from renewable sources.”
ING Bank also predicts that both the trade and current account deficits will stabilize around 5.0% of GDP. Yet, the bank warns over future challenges like the workforce and the accession to Eurozone.
“Romania could be one of the favorite destinations for companies from Western companies looking to relocate production closer to their home
markets. A determining factor in the investment decision will be played by the workforce availability and cost. With a population that could
reach 18 million by 2034 and a median age of over 45 years old, the outlook for the labor market seems however uncertain.
But perhaps the most important change we could have in the next 10 years is Romania’s accession to the euro area. Although at the moment
Romania does not fulfill any convergence criteria, we believe that an eventual success of the future commitment to budget deficit below 3.0%
of GDP sometime around 2032 could decisively help to fulfill other criteria, namely those related to interest rates, exchange rate and public debt.
Whatever the outcome, we believe that clearly setting a major country objective such as adoption of the euro has the potential to mobilize new
resources for development and provide an anchor of stability and predictability in an uncertain economic environment,” the report concludes.
"30 x 30. 30 years of transformations. 30 years of INGchief economistdoubleeconomyGDPgross domestic productING BankING RomaniareportRomaniaValentin Tataru
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