Central bank governor warns on disparities among Romanian regions, brain drain

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Governor of the Romanian National Bank (BNR), Mugur Isarescu has told the annual conference on the Competition Environment and Competitiveness in key sectors of the Romanian economy organised by the Competition Council and the Chamber of Commerce that the two cycles- the electoral and the economic one must be correlated, while warning on the brain drain and on the disparities among regions in Romania.

Isarescu also lobbied for fiscal discipline and the need of reforms in order to have a healthy economy.

“As for the real convergence, we rose from 21% in 2000 to 66%, posting the strongest advance among the countries in the region. But we fell in the medium income trap, and it’s very difficult to get out of here. When  the economy increased by itself we stimulated to reach 7%. Was that necessary? 4-5% was enough. Hard job…”, Isarescu pointed out.

He also said that it is a hard job to reconcile the electoral/political cycle with the economic one. “You cannot throw the electoral cycle away. We live in democracy, so you have to reconcile the economic and electoral cycles”.

The BNR governor also warned that disparities among the Romanian historical regions are aggravated. “In terms of GDP/per capita, Bucharest is outranking Berlin. 40km away from Bucharest there are yet very poor areas. It’s true there are disparities between Nevada and Massachusetts, but in Romania disparities among regions are huge. These issues must not be neglected. The disparities go deeper because the infrastructure in the eastern region is not developed“, Isarescu stated.

He also warned on another serious problem: the pro-cyclical fiscal policies. “We stimulated the GDP in other countries. The fact that the GDP was based on consumption, so, on imports, means that we created jobs in other countries and it’s not good.”

As for the economy’s going down, the central bank governor underlined that provided reforms are made, the markets will force us to take correction measures exactly when we mustn’t. “We have to avoid it: to be forced to take correction measures in a period of decline”, he argued.

“If we want the economy to perform on long term, not only companies need to make efforts, but also state institutions need to apply reforms. The existence of some strong institutions is the best indicator of a healthy development. It’s not only the size of the taxes that counts. Some are talking about the tax reduction. What reduction when we collect so few taxes? Fiscal discipline is what we need“.

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