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EBRD asks Romania to reach new model of economic growth

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At the beginning of 2018, Matteo Patrone, the regional  European Bank for Reconstruction and Development (EBRD) director for Romania and Bulgaria, said the economic results obtained by Romania in 2017 were fantastic, but pointed out that Romania should adopt a different economic model if it wanted to avoid the crisis triggered by the present boom based on consumption. In his opinion, Bucharest officials could do that by increasing investments in infrastructure and improving the absorption degree of European funds.

In May, EBDR improved to 4.6% estimates about the advance of Romanian economy in 2018, and showed that in 2019 economic advance would slightly drop to 4.2%. Compared to the previous November 2017 prognoses, EBRD improved its estimates about Romanian economy by 0.4% for this year, from 4.2% to 4.6%. Romania’s economic advance will gradually moderate from 7% in 2017, when it was stimulated by expansionist fiscal policy and salary increases. More sustainable levels of 4.6% can be seen in 2018 and 4.2% foreseen in 2019, EBRD showed.

In September, Suma Chakrabarti, the EBRD president, warned that the slowing down of structural reforms affected the productivity of Romanian companies. According to him, the slower increase rate of productivity in the last three years shows the slowing down of structural reforms in Romania. There are still many business sectors that need urgent reforms, when accession to EU no longer represents impetus for reforms, as it happened 15 years ago.

The head of RBRD requested Romanian authorities to intensify reforms leading to unblocking the development of infrastructure, showing at the same time that EBRD was interested in financing investments projects in road and railway infrastructure and help the privatization of state owned companies.

The same as the other international financial institutions, EBRD reviewed in November, estimates about the advance of Romanian economy in 2018 and 2019. According to the latest prognoses of the institution, Romania’s economy would register a 4.2% increase in 2018 and 3.6% in 2019. Compared to the previous May  prognosis, EBRD reviewed its estimates about the evolution of Romanian economy by dropping 0.4% for this year, from 4.6% to 4.2% and by 0.6% for next year, from 4.2% to 3.6%.

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