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Lazea: Romania structurally farther than Central and East European states
Romania is structurally farther than states in Central and Eastern Europe because in 2015 it decided to stimulate consumption, says Valentin Lazea, BNR chief economist.
“The first question is whether we are structurally more similar to states in the euro area or at least to states and Central and Eastern Europe. In my opinion, the answer is: No, we are not. We are farther from them because what happened in 2014-2015, when we tended to zero with the current account deficit and we almost became net exporters and exports tended to exceed imports, would have got us closer to the Vishegrad area, the Czech Republic, Hungary and Slovakia. Poland is an exception because it has a low deficit. What was bad if we became another exporting country? In other words, the manufacture workshop for Germany, Austria, France, Holland and so on. That was the model. But in 2015 the decision was made to stimulate consumption by reducing VAT. Of course that led to the increase of imports,” said Lazea at a press conference.
He pointed out we should wonder whether this country is less vulnerable to future shocks.
“I will refer to the following question: Is the direction adopted by Romania right or wrong? First of all, I think it is the most stupid question I find in sociological tests. Right or wrong according to what? This question should be explained more clearly by asking two other questions: Is Romania more similar structurally to states in the euro area or at least with states in Central and Eastern Europe today, as a result of those policies? That seems to have sense. The second question is: Is Romania less vulnerable in case of a future international crisis?” said Lazea.
The economist drew attention to the fact there are four false myths about foreign deficit circulating in Romanian society. The first myth is that at our development level deficit is needed; the second is that we are Latins, who have the tendency to make imports, compared to northern people who make excess. The third fake myth is that current account deficit is low, only 6.7 billion euros and the fourth is that we need current account deficit because we need investments.
Lazea says that “until these four myths are not thrown away, we will say it can go on that way.” In context, Valentin Lazea explained that 20 European countries have excess current account and if Romania intends to be structurally like the Europeans it will have to grow through exports and investments not consumption.
As for vulnerabilities we are exposed to in case of a future international crisis, the specialist pointed out that emerging countries learned from crisis of 1998 and 2008 that they have to be on guard by added current account and lower deficits, but Romania has not learned that lesson.