OECD: Boosting productivity and human capital will foster economic growth in Romania
Accelerating the pace of structural reform, investing EU funds effectively while ensuring good fiscal management will help strengthen the recovery and future growth, which will lead to better opportunities for people in Romania to get ahead, according to the OECD Economic Survey of Romania.
Romania made strong progress in raising living standards prior to the COVID-19 crisis, and the resilience of its economy during the pandemic has been impressive, the report reads. The recovery is set to continue, but monetary policy should keep tightening as needed, and a credible medium-term fiscal consolidation plan should be put in place, the authors of the report argue.
The survey projects Romanian GDP growing by 4.5% in 2022 and 2023, after 6.3% growth in 2021.
With inflation picking up strongly and now outside the central bank’s target band, monetary policy should keep tightening as needed.
Furthermore, a credible medium-term consolidation plan should be put in place to ensure a gradual reduction of the budget deficit, the OECD experts recommend. This plan should include reforms to accelerate the absorption of the NextGeneration EU funds, improve the efficiency of public spending and increase the financial sustainability of the pension system in the face of an ageing population.
Accelerating the modernisation of the tax administration, as well as reforms to eliminate inefficient tax provisions – notably for micro-enterprises and specific sectors like construction – and to increase less distortive taxes like property taxes would help to raise revenues and make the tax system fairer and more efficient.
Productivity growth needs boosting, OECD experts also stress. At present, productivity in the Romanian economy sits at about two-thirds of the OECD average.
An improved business environment and a strong rule of law environment helping to attract investment will be key to boosting growth and income levels further and getting Romania back onto its path of economic convergence with OECD countries.
andrei@romania-insider.com
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