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Greg Konieczny: a better absorption of the European funds would contribute to the growth of Romanian economy by 5% in the years to come

A better absorption of the funds from the EU could contribute to annual growth of 5% in the years to come, which would make Romania one of the economies with the most rapid growth rate in Europe, Greg Konieczny vicechairman of Templeton Emerging Markets Group and manager of portfolio of the Fondul Proprietatea said in an article for the publication Investment Week.


‘There is momentum enough for Romania to have growth of 3% per year. A better absorption of the EU funds could contribute to annual growth of 5%in the years to come,which would make Romania one of the economies with the most rapid growth rate in Europe’ the FP manager said.In his opinion, although the framework for the reforms has been crated, the investment potential of Romania must be supported. The openness of the companies for private capital has the potential to contribute to macroeconomic stability by the improvement of the direct foreign investments and portfolio, as well as to facilitate the development of the capital market. The interests at historic low level complete the list of opportunities as they promise to start the growth of the basis of local investment of retail and institutional investors.


‘Romania has made significant progress as regards the stability of economy through measures of austerity, privatisation programmes and the initiation of fiscal consolidation in the following years. Moreover, Romania kept a reduced level of inflation and balances of current account and fiscal account and it is in a better position to promote to the category of emerging markets. The improvement of the country from the perspective of global competitiveness is not surprising. It recorded one of the highest growth rate of GDP in the EU in Q1 of 2014, with increased GDP by 3.8% every year. At the same time, the growth under expectations of GDP in Q2 of 2014 when the Romanian economy increased only by 1.4% was sufficient to surpass the majority of the EU members.


The increase of private consumption, supported by salary growth and the low rate of unemployment contributed to this evolution. The private demand continues to benefit from reduced inflation and low interests, which will stimulate the trust of consumers’ the article from the weekly international publication Investment Week shows dedicated to financial consultants.


Konieczny considers that the development of the Romanian capital markets depends on the Romanian government and the political delays, including presidential elections of November, could slow down the progress of reforms already delayed.


‘Although the privatisation programme was in the centre of the primary capital market in Romania, privatisations and IPOs need support on the part of the government to support these companies to reach their potential and to generate foreign investment, which will help the economy to grow and to develop.The Stock Exchange will not generate growth on a long term without help, and the public bids must get the trust of the investors. The Romanian government proved its commitment to the development of the capital market through IPOs which included listing of the Romgaz and Electrica companies and the launching of public debate with regard to the adoption of the legislation for the disappearance of some of the barriers which stop the creation of modern capital markets in Romania’ the FP manager says.


Greg Konieczny notes that the public funding was established over the last years, following the efforts of the Romanian government to conform to the requirements imposed by the IMF as part of the stand-by agreements. Romania has one of the most solid economies from the point of view of finances in the region, after getting to macro adjustment and significant structural adjustment in the present programme with the IMF, the World Bank and the European Commission.


The privatisations and the listings of state companies encouraged the companies to become more transparent and supported an increased resistance to political pressure. The benefits of bringing these companies to the stock exchange are visible, and the road is established to make the recent lists of companies to become more efficient and more profitable, the quoted source shows.


Another contribution to the structural improvement in the state companies in Romania was brought about by the approval of a code of corporate governance which supposes the election of independent councils and professional managers to lead the companies. By this launching of the STEAM initiative, the Authority for the Financial Supervision in Romania tackles the issue of investments in the country, by limiting bureaucracy, as regards access to the capital markets by foreign investors, by increasing the efficiency of the regulator and the standards of corporate governance.


On the other hand, the FP manager draws the attention that it is necessary to have structural reforms, especially in the sector of energy and that of transport and the big taxes to invest in the capital market in Romania and the excessive regulations continue to put under pressure the flows of foreign investments due to the risks associated with the local market.