The Governor of the Romanian National Bank, Mugur Isarescu, said on Monday that investments need to be prioritised so as to support economic growth, and that forcing growth will lead to the creation of imbalances and tensions, according to

“Investments in infrastructure (education, health, and roads) have not only an economic role, but also a social one. Romania has the biggest regional disparity among EU states. Even the European Commission has noticed that the differences between Romania’s development areas have deepened, leading to the emergence of regional competitiveness centres. We’ve had convergence, we have come closer to the EU’s level of development, but not in the whole country, only in some regions”.

According to Isarescu, the lack of infrastructure to connect historic provinces of Romania is something that can unfortunately lead to these discrepancies becoming permanent.

Romania’s entry into the EU was accompanied by hope for progress and prosperity, said Isarescu, who also repeated the idea of a need for balanced economic growth which will not generate tensions, in other words, sustainable growth.

“We need healthy growth, which will not determine the accumulation of risks or painful corrections in the future. Imbalances need to be corrected slowly and progressively”, Isarescu added.

The BNR governor also showed that Romania’s membership in the EU was and still is a success.

However, it is the second time in the last few months when Isarescu warned about the fast growth of Romania’s economy.

“Governments usually maintain a stable taxation system in order to give predictability to the business environment, so they don’t cut taxes during recessions. But governmental expenditures are higher during recession, not when the economy is in fast growth. During periods of economic momentum, governments are satisfied with relatively small increases, but which allow the accumulation of reserves to stimulate the economy during a recession. I give this example to underline the idea that economic stability is key to have a constant progress of living standards, for example measured through GDP/inhabitant. Stimulating consumption during periods when it is growing anyway and without the help of macroeconomic policy does not help with recovering discrepancies”, Isarescu had said two months ago.

He continued, “To grow faster we need to increase our growth potential. That means that the potential of production factors needs to be increased. I’m referring to all production factors, but especially to the capital and labour factors. Our problem is that we have difficulties with both of them”.



The post Isarescu: Forcing economic growth results in tensions; Romania has significant regional discrepancies in terms of development appeared first on Business Review.