Romania, on its way to become Europe’s little economic ‘tiger’

Since its accession in 2007, Romania slowly got the  accreditation as one of Europe’s few ‘tiger’ economies. Joining the European Union (EU) was a driving force for reform and modernization. Romania’s recent economic growth performance of 1.9 percent in Q3 of 2014 over Q2 gives grounds for optimism… cautious optimism. Nevertheless, a snapshot of today’s Romania shows a country in a fragile macroeconomic equilibrium: low inflation, small budget deficits, stable currency exchange rate, low public debt.

More than that, direct foreign investment to Romania totaled EUR 1.5 billion at the end-September, according to National Bank of Romania, of which equity stakes (including reinvested earnings) amounted to EUR 1,340 million and intercompany lending to EUR 171 million.

One of the most important country’s goals at the moment is to be prepared to join the euro zone in terms of economic figures. 2019 is not anymore the deadline, 2021 seems to be more realistic term. Recently, Mugur Isarescu, the BNR governor declared Thursday that Romania had reached macro stability and fulfilled all five convergence criteria but could not adopt euro too soon. He pointed out that Romanian economy was stable but had problems at micro level.

As part of the Europe 2020 strategy for a smart, sustainable and inclusive EU economy, Romania submitted a national reform programme (NRP), which was assessed by the Commission. This National Strategy aims to connect Romania to a new philosophy of development, adopted by the European Union and widely shared globally—that of sustainable development. It is about the continuation of fiscal consolidation in a differentiated manner, favorable to growth, lending restart, due to the economy, promotion on short and medium-term of the economic growth and competitiveness, combat of unemployment and of the social consequences triggered by the crisis, modernization of administration, stimulation of labor force, particularly among young people and financing the economy, especially the SMEs.

In conclusion, in the last 25 years, Romania has made considerable progress developing institutions compatible with a market economy. The crisis prompted long-needed reforms, with support from the international financial institutions, in health, education, the financial sector, public financial management, public administration, social insurance, and social assistance.

 

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