Key Points:
Romania's economic growth potential is now 3.5-4%, given its current level of development, and the idea that GDP could grow by 7% is a myth that needs to be combated, according to Valentin Lazea, BNR's chief economist, speaking at the conference "Romania's Road to Excellence through Accession to the OECD Elite" organized by the Association of Romanian Financial-Banking Analysts (AAFBR).
"A high-income country like Romania, as classified by the OECD, can no longer grow by 5-7% no matter how much we want to. What was possible from 2001 to 2010, growth of 5-6%, was possible at our level of development at that time. From 2010 to 2020 it was possible to grow by 4.5-5%. Now the potential is 3.5-4%. This is not understood and it is taken for granted that we must grow by 7%."
Asked "why can't Romania grow by 5-6%?", Valentin Lazea mentioned the three factors that make up potential GDP: capital, labor, and productivity. "On the labor force factor we have immense problems in terms of demographics, education, labor force participation, migration. The labor force is very limited. You can have capital and increased activity, but you are limited by this factor. The main problem of the Romanian employer today is that he has to pay more money than the respective worker produces. The idea that Romania can grow at any rate is a falsehood."
Lazea recalled that at the level of economic development, Romania is at level 4, a high-income country. There are 34 of the 38 OECD member states at this level. Of the 38 countries, only 21 are full democracies, and 15 are imperfect democracies, in this category also including Romania, Poland, Czech Republic, Hungary, and two states have hybrid regimes, Mexico and Turkey.
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