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BNR’s Lazea: Romania occupies a peripheral macroeconomic position in the OECD
Romania occupies a peripheral macroeconomic position in the Organisation for Economic Cooperation and Development (OECD), the reason being three urban myths which brought the country in this situation, such as economic growth over the potential or economic growth based on consumption and not on export, stated the head-economist of the National Bank of Romania (BNR), Valentin Lazea at the annual conference of AAFBR.
He showed that three months ago he wrote an article with the theme ‘Is Romania worthy of getting into the OECD?’, where he analysed the 39 member states starting from two indicators: the level of economic development and the degree of democracy.
According to the BNR head-economist, from the point of view of the level of economic development, Romania has a high level, similar to 34 out of the 38 OECD member states. Moreover, out of 38 countries, only 21 are full democracies, and 15 are imperfect democracies, in this category getting Romania as well, while the two states have a hybrid regime.
Valentin Lazea extended the analysis and wanted to know how Romania would perform if it were member of the organization from the point of view of macroeconomic indicators.
"On inflation, if we entered this month, we would be fourth from the bottom. Higher inflation than us last month are Turkey, 68%, Colombia, 7.4%, and surprisingly Iceland, 6.8%. So we would be fourth in the queue. Not too bad either, if you ask me. On the budget deficit, The Economist's forecast says that only one country will have a deficit of over 6% this year, and that's the US, 6.1%. Romania would be neck and neck with the United States for the last place in the OECD in budget deficit this year. Worse than Turkey, which would have a deficit of 4.6% of GDP, worse than Colombia, deficit 5.1%, worse than Mexico, deficit 4.7%", he argued.
For the current account deficit, Romania would be last,with 6.5%. For economic growth we would be ok, being in the top group with 2.5%, being surpassed only by Turkey, with 4%.
"To what facts are these peripheral macroeconomic positions due. I think they are due to urban myths that have brought Romania to this stage. Urban myths that are shared by politicians and the press and the entrepreneurial class and employees, everyone. And anyone who speaks out against them is branded the enemy of the nation in a second. I'll tell three such urban myths. Myth number one: economic growth must be as high as possible, if it can be above potential growth, even if that equates to higher inflation. There are many employers who say: if our business does not grow by more than 6% we don't even care about getting out of bed in the morning. Those who say things like this - and there are many who say this, and they are not countered by you, the financial banking analysts - do not take two things into account. The first thing is the mathematical impossibility. A doubling of GDP over 10 years would imply an average annual growth of 7%. Can Romania grow by 7%? The second thing they don't take into account when they talk about growth, no matter how big, is that the more a country grows in terms of GDP per capita, the closer it gets to what is called the production possibilities frontier", explained the economist.
The second urban myth is that the budget deficit doesn't matter because we have European money at our disposal. But, he continued, European money is recorded both on the expenditure side and on the revenue side.
The third myth concerns the economic growth model based on consumption rather than exports.
The Association of Financial and Banking Analysts of Romania (AAFBR) held its annual conference on "Romania's Road to Excellence by Joining the OECD Elite" on Thursday, the 16th edition of the event.
This year's AAFBR conference was dedicated to Romania's application for OECD membership.