Romania must implement reform to facilitate investment, make progress on privatization and improve transport infrastructure over the coming year, according to the European Bank for Reconstruction and Development (EBRD). In the EBRD's annual Transition Report, published today (November 7 ) backtracking in reform of the energy sector is also highlighted as a point of concern. Top of the EBRD's list of key priorities for Romania is making the investment climate more clement.

“Heightened efforts are needed to remove red tape and licensing problems, which are cited as problems by enterprises in business climate surveys,” states the EBRD report. Like the International Monetary Fund, the EBRD also urges the government to hurry along the sale of state owned assets.

Despite the Government's commitment to privatization, according to the EBRD, “implementation has been slow and should be accelerated if sales are to be achieved next year.” On improving transport infrastructure the EBRD deems the legislation necessary for private sector involvement as now in place and that the authorities should increase their efforts to attract investment in vital projects.

The EBRD also highlights the weakening economic growth and the exposure to a eurozone downturn as causes for concern. The political situation over the summer and European fears for democracy and the rule of law are revisited and the EBRD again flags up Romania's miserable record on EU funds absorption. It's not all negative – the EBRD report lauds the strengthening of contingency planning in the financial sector and describes Romania's banks as “liquid and well capitalized,” but on a cautionary note states that vulnerabilities remain.

Legislation for Public Private Partnership is now in place, according to the EBRD. Over the past year Romania's authorities have enacted the necessary legislation demanded by the EU, but it appears that the actual projects are lagging behind the law. Public Private Partnership road and rail projects are still lacking, according to the EBRD.

And the figure for GDP growth in Romania this year? “Below 1 percent,” says the EBRD, following the IMF, albeit without committing to an exact figure. Growth over next year will continue to be sluggish, the EBRD believes but over the medium term “prospects remain favorable, reflecting the diversified economy and strong catch-up potential in a country where GDP per capita [...] is less than half the EU average.”

Liam Lever, liam@romania-insider.com

(photo source: sxc.hu)