Ziarul Financiar: Central bank works on sustainable growth strategy for Romania

Romania’s National Bank (BNR) is currently working on an economic development strategy for the 2016-2020 period, which includes measures to accelerate economic growth from 3% to 5% per year. The strategy is aimed at accelerating Romania’s real convergence to Western Europe and help the country join the Eurozone, according to sources familiar with this project quoted by local financial newspaper Ziarul Financiar. President Klaus Iohannis may present the economic growth strategy at the end of June. Iohannis had a meeting with Prime Minister Dacian Ciolos and Romania’s National Bank Governor Mugur Isarescu at the end of May to discuss about this project. Romania’s National Bank had the initiative of drafting this strategy, being for the first time when it goes beyond its role to get involved in a project targeting the real economy. The work group coordinated by BNR, which also includes representatives of the Presidency, Economy Ministry, and Romanian Academy, has already drafted an initial document that will be sent to business association, unions, and other opinion leaders for feedback and contributions. BNR’s mission is to ensure price stability and to supervise the local banking sector in Romania. The central bank’s officials have often criticized the Government in recent years for the fiscal relaxation measures and public salary increases aimed at boosting the economy on the short term, which may generate macro-economic adjustments on the longer term. However, this is the first time when BNR works on coming with alternatives to those measures, which should help Romania’s economy accelerate its growth in a sustainable way. The strategy, which is coordinated, among others, by BNR’s chief economist Valentin Lazea, aims to come with measures to boost domestic production. Some 18-20 economic sectors will be targeted by the new measures included in this strategy, which will require resources totaling some 10% of the country’s GDP, according to Ziarul Financiar. However, the aim is to reallocate the state’s expenses more efficiently rather than increase them, as BNR doesn’t want Romania to increase its public debt, which now stands at about 40% of the GDP. Romania’s economy went up by 3.8% last year and by 4.3% in the first quarter of this year. Forecasts by the European Commission, International Monetary Fund (IMF), World Bank, and European Bank for Reconstruction and Development (EBRD) show that the country’s economy will increase by over 4% this year, but may reduce pace starting 2017, when the effects of short-term fiscal boosts will start to fade out. Only Romania’s Prognosis Commission estimates that Romania’s GDP growth will continue to accelerate in the following years and get close to 5%.