This year’s SAR Annual Policy Analysis and Forecast Report addresses two major issues:
– How close is Romania to real convergence with the European Union, how much the recent growth has helped towards that goal and what else there is left to do before the country is able to join the Euro zone.
– What are the public policies that need to be put in place so that performance can increase more smoothly and more efficiently.
The Forecast highlights the above-average GDP growth, that surpassed expectations for the second year in a row: 2014 brought another 2,9% to Romania’s GDP – according to provisional data available from the statistics office – and could be called the first year of post-crisis growth, after 2013 had barely equaled the GDP of 2008.
Exports were the driving contributor to this growth, with another historic peak last year, of Eur 50 bn., up almost 50% as compared to 2008. Inflation is at an historical low, the 1,1 percent at year-end being in line with the more developed economies in Europe. The unemployment rate (5,29%) is nearer to the most optimistic of last year’s expectations as well, even after the increase in minimum wage generated worries that there may be additional job losses.
However, the panel of experts questioned by SAR are still cautious about whether this is a confirmed trend or just the result of a fortunate conjecture, therefore the average of estimates is still rather modest, with an average forecast for GDP growth in 2015 of 2,4%, and a low of 1,5%. Rock-solid stability of the currency is still expected, with large consensus on the 4,5 RON/EUR, both average and year-end.
The stock exchange and real estate market are also expected to confirm their previous growth, based on the positive adjustment of historical imbalances.
Technically, Romania is ready to enter the 2-year ERM2 Euro-zone accession mechanism at any point, as it fulfills or is able to fulfill all five Maastricht criteria. However, real convergence of the economy is still far, with uncertainties at both ends of the risk spectrum: either be proved unable to keep up with the core speed or be overwhelmed by the cheap credit and pushed into a new bubble.
Therefore, more steps need to be taken in order to prepare the economy for accession. Mostly, it’s about adjusting taxation and public spending in order to give more leeway to free enterprise, but also about strengthening the legal framework so that the playing field becomes better leveled for market competitors.