European Semester – 2017 Romania Report

This report provides an assessment of Romania’s economy as described in the European Commission’s Annual Growth Survey published on 16 November 2016. In the survey the Commission calls on EU Member States to double their efforts on the three elements of the virtuous triangle of economic policy – boosting investment, pursuing structural reforms and ensuring responsible fiscal policies.

Some of the most important conclusion are:

Romania’s economy has been on an upward trend for the past two years. A post-crisis peak in terms of growth has been achieved in 2016 (at 4.9 %), strongly influenced by domestic demand on the back of procyclical fiscal policies. The rate of growing is estimated to lose some momentum, but remain elevated over the following years with a forecast for 4.4 % in 2017 and 3.7 % in 2018. However, the current account deficit deteriorated in 2016 and is estimated to deteriorate further driven by import growth due to strong domestic demand. Private consumption was at an elevated level as a result of wage hikes and indirect tax cuts. While private investment was supported by low interest rates and stable investor confidence, public investment declined in 2016 due to an unremarkable management of EU funding.

The labor market has gain strength driven by the robust economic growth. The progress of the labor market has been associated with robust wage growth. The unemployment rate is approaching its pre-crisis lows and it is estimated to improve further in 2017-2018. Employment had a slight decrease in 2016, but is expected to grow at a moderate pace.

In concern with the progress of reaching the national targets under the national Europe 2020 strategy, Romania is performing well in the areas of national greenhouse gas emission, renewable energy, energy efficiency, tertiary education and reducing the number of people at risk of poverty or social exclusion. However, employment rates, research and development efforts and school dropout rates remain some distance away from their respective targets.

The main findings of the analysis in this report, and the related policy challenges, are as follows:

Poverty is declining, but high income inequality persists. Romania has one of the highest levels of income inequality in the EU and rising, partially driven by decreasing redistributive effects of the tax and transfer system. Although poverty rates are declining, poverty and social exclusion persist for young people, families with children, people with disabilities, Roma, the rural population and inactive people. A change towards more integrated services targeted to disadvantaged groups is planned, as the provision of these services is low.

Public investment spending is high, but low infrastructure efficiency is constraining growth. Public investment spending has been among the highest in the EU in the last decade but the perceived quality of infrastructure ranks among the lowest in the EU. Inefficient public investment and public procurement, high administrative burdens and low provision of e-government services are major obstacles to boosting growth and productivity.

The source for this article and the full report here:

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