Mark Mobius: Romania to become more competitive. Domestic demand is the key

The World Economic Forum (WEF) recently released its annual “Global Competitiveness Report,” which details the strengths and weakness of 144 countries in myriad factors including education, infrastructure, health and technology. Starting from this idea, Mark Mobius, Executive President of Franklin Templeton Investments said in a post on his blog that Romania has made progress on a number of fronts, and it’s not a big surprise to see that the country has improved in global competitiveness. Franklin Templeton Investments has been managing Romania’s largest investment fund, Fondul Proprietatea, since September 2010.

“Romania weathered the sovereign debt crisis that hit the eurozone a couple of years ago, as well as the more recent tensions between Ukraine, Russia and the West. In the first quarter of 2014, Romania’s GDP rose 3.8 percent on a year-over-year basis, making it one of the fastest-growing economies in the European Union (EU). While the second quarter 2014 growth figures were a little softer at 1.4 percent, Romania’s growth still outpaced the EU at large. Domestic demand has been aiding this growth spurt, and an increase in the minimum wage in January has played a part in boosting consumption.

I think Romania’s compliance with the International Monetary Fund (IMF) in the past few years has been beneficial and has brought stability for public financing. We also see some positive developments in Romania in general; unemployment and interest rates are currently low, and disposable income is growing,” said Mark Mobius and continued: “That said, progress has been slow, and local consumption had been very depressed since 2008 and is just now starting to recover. Romania has made strides forward, but we think it still has a ways to go to become even more competitive globally. People were not really spending, so we think domestic demand is where the next growth engine of Romania could come from, on top of increased industrial production and exports.”

As investor in Romania, through Fondul Proprietatea, Mobius said that Franklin Templeton Investments focuses attention to the implementation of proper corporate governance standards. “We believe it’s essential for state-owned companies to become more competitive and profitable. Romania’s government is also considering the sale of more shares in state-controlled companies, which we view as positive. We have observed that good corporate governance usually leads to market performance, and should benefit shareholders and the country,” reads the blog posting.