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Isarescu: Romania can speed up its economic growth
Romania can speed up its economic growth, but in order to secure its long-term sustainability its growth should not count on more tax and monetary incentives, but on structural reforms and, implicitly, on increased labour productivity, the only way leading to truly sustainable gains in the living standards, according to Governor of the National Bank of Romania (BNR) Mugur Isarescu.
"We are finding ourselves in one of the most favourable macroeconomic positions in our post-Communist journey. And yet, we should not rest on our laurels and neglect what we have to do. We should be concerned about consolidating what we have achieved, instead of weakening it. (...) It does matter how fast you grow, but it is equally important how," Isarescu told an economic conference in Bucharest on Tuesday.
He added that daring policies can provide short-term benefits, but in the long run they can trigger imbalances.
"A higher economic growth is achievable, but in order to be sustainable it should be the result of actions on economic potentials, but such potential is negatively affected by sluggish public investment and structural reforms, and priority action should be done in these two areas," said Isarescu.
He also mentioned the problem facing Romania with European funds, which absorption rate he says is far from satisfactory.
"Precisely such blockages substantially hinder economic growth potentials. And providing additional tax or monetary incentives instead of conducting structural reforms is not the best choice in the medium and long run," warned Isarescu.
Among the necessary reforms, Isarescu mentioned increasing competition in key economic sectors, such as energy and transport, warning about eligible workforce, including in the education system, and about the need for the development of a quality transportation infrastructure. Isarescu said these reforms are important because they secure sustainability for economic growth, and it is equally important that they overstretch electoral cycles.
Isarescu added that even the experience of countries at a more advanced stage in gapping the differences separating them from developed economies has led to the conclusion that the convergence process has one constant trait, namely increased labour productivity.
"Actions to this end are essential to the progress of economic convergence because that would allow the quicker growth that we all want, as well as the pay rises that we all want more than economic growth. That way truly sustainable gains in living standards are possible," he said.
Isarescu added that although at first sight gains in labour productivity depend solely on companies, they still require a concerted effort of the business environment and the government in support of productive investment.