SIMILAR ARTICLES

Alan Duncan / We cannot allow our societies to continue to be attacked and undermined

Global security is under threat. The system of international rules that has kept our citizens safe and our societies prosperous since the end of the Second… Mai mult

Q2 / Average monthly income per capita in Romania has risen to nearly RON 1,600: Changes in redistribution of family budget

Data published by INS for the second quarter of 2018 show that Romanians’ monthly incomes have reached nearly RON 1,600 per person. They were RON… Mai mult

Current account deficit flickers to red on dashboard

According to the data released by Eurostat, Romania’s current account deficit exceeded, in the second quarter of the year, the threshold of five percentage points… Mai mult

Strategic chemical industry: Romania, on top in import increase and ranking last in EU in terms of increase in exports outside single market

Data published by Eurostat show that Romania recorded the second highest annual growth rate in imports of non-EU chemicals from 2007 to 2017 (13.1% per… Mai mult

Economic growth in the pocket: Current accounts vs. saving accounts – 64% to 4.5%

  Rising incomes have fuelled consumption and, implicitly, the economic growth in recent years, but not the savings. Although a large proportion of the population… Mai mult

“Highest growth in EU”: Investments in first three quarters of 2017 – at the level of 2012

de Marin Pana , 18.12.2017

In the first three quarters of 2017, net investment in the national economy amounted to about RON 50 billion, up by 3.6%, compared to the same period in 2016, the National Institute of Statistics announced. This is the effect of a considerable advance in the third quarter when the rhythm climbed to + 10.3%.

The good news is that data shows the third year of growth.

The less good news is that investments remained far behind the 7% GDP growth.

And the bad news is that we have just returned to the level of investments (in the first three quarters) registered in 2012. The year in which the GDP was RON 595 billion and not RON 908 billion, as estimated for 2017.

Here is how this indicator evolved over the past five years:

*

  • Evolution of net investments in the national economy (2013=100%)
  • Year
  • Net investments (million RON)
  • Equipment
  • Construction
  • Other expenses
  • Evolution of the investments
  • Investments compared to 2012

*

Maintaining investments below or at about the same level as in 2012, in the context of the GDP rising from about RON 595 billion to RON 908 billion over the last five years (+53%), is a serious economic policy error, whose effects will inevitably be seen in the future. Without stepping up investment, we shall not be able to cross the range of about 70% to 80% of the average GDP per capita in the EU and we shall find ourselves in the so-called “middle-income trap“.

From this perspective, the considerable increase in investments during the current year would be welcome. The condition is for this trend to be retained by the end of 2017 and in 2018, which is unlikely to be seen because of the budget constraints, to remain within the 3% of GDP deficit threshold, under the pressure of the expenditures riskily engaged for the wages in the public sector and pensions.

*

  • Evolution of net investments in the national economy in 2017
  • Quarter
  • Net investments (million RON)

*

The change in the way of placing the emphasis in the economic growth from stimulating the production in times of crisis to the continuous and strong push on the consumption button is becoming a key issue in this context. Which should be reversed and balanced in a fair way by the decision-makers.

The path of just increasing the consumption does nothing but sustains an economic advance that will get suffocated in the medium term, once it will appear the physical and moral wear and tear of the purchased assets of a value capped in nominal terms, and largely left behind the GDP growth.

Unfortunately, the investment effects cannot be seen immediately, but in the years to come, and totally different policy-makers may or may not benefit from the change in approaching the economic policy.

Although, in theory, resource allocation to infrastructure development, acquisition of production assets for modernization and increasing the competitiveness is absolutely desirable, and must be stimulated by the state through adequate policies, the easy allocation way to increase revenues and spreading the resources to consumption can prevail in the social practice.

In fact, sustainable over time, the extra pay can be recovered and represent the basis for future social benefits in the future only by increasing the efficiency of the activity that depends on investment.

In other words, wages and pensions can grow sustainably only by maintaining a solid pace of investment that would generate a robust growth in commodity and service sales that are duly taxed in terms of public finances.

Forcing the pace of the income growth set at the administrative level (in the public sector and in pensions) only allows an increase only for the moment of the living standard, of the “competitiveness” on the demand side (not on the supply side).

If they are clearly above the GDP growth (about three times today), the capability to cover the additional demand from own sources and without strongly increased investments will suffer, which leads to the increase in the share of foreign products that will cover the gap left.

A direct consequence, with small investments relative to the GDP, is that it will be increasingly harder to achieve high growth results. Instead of developing its own economy, the exacerbated demand is driving growth in the foreign economies whose more competitive and sufficient products will come to cover our extra demand.

Therefore, an optimal balance in the allocation of public resources between investments and income growth would be mandatory for systematically and seamlessly reducing the gap with the West. That would be for us to avoid progressively transforming ourselves into an outlet, increasingly dependent on the supplies from abroad.

Mergeți în homepage ›

Publicat la data de 18.12.2017

Lăsați un comentariu


NEWS

Cluj-Napoca - only city in Romania that receives European funds for innovative projects

Only Cluj-Napoca is among the 22 European cities that will receive financing from the European Regional Development Fund (FEDR) for innovative solutions in addressing urban… Mai mult

Prime Minister Dancila dismissed 13 of 15 civil society representatives from Economic and Social Council. They were blocking legislation that did not gathered all opinions

Prime Minister Viorica Dancila has replaced 13 of the 15 civil society representatives in the Economic and Social Council (CES). Following a decision published on… Mai mult

West Quadrilateral / Four counties joined to directly access European money for major infrastructure projects

From right to left: Gheorghe Falca, Nicolae Robu, Ilie Bolojan. Emil Boc, Mayor of Cluj Napoca, misses Four mayors from the West of the country… Mai mult

Chamber of Deputies / PSD loses UDMR’s support for amending Offshore Law, draft returns to committees for a week

The plenum of the Chamber of Deputies decided on Wednesday to resend the Offshore Law to committees after a seemingly surprising request of UDMR leader… Mai mult

Government amended insolvency law. Guarantees given by Minister Teodorovici

The Government adopted on Thursday the draft Emergency Ordinance for amending and supplementing legislation in the field of insolvency, which provides among other things for… Mai mult

Romania ranked 7th in EU in terms of renewable electricity

Unlike the vast majority of the economic areas, in which we are at the bottom of the European ranking, Romania succeeded to rank 7th by… Mai mult

Resounding failure of PSD lobbying action in Brussels

There are clear signs that the lobbying action launched by the ruling coalition in Brussels in favour of the government in Bucharest will end with… Mai mult

MFP: Romania does not endorse a separate budget for Eurozone and rejects the idea of ​​taxing financial transactions

Romania does not endorse a separate budget for Eurozone and rejects the idea of taxing financial transactions, Minister of Public Finance Eugen Teodorovici said after… Mai mult

Finance Ministry wants to change rules for insolvency: state could also register claims after procedure is launched

Companies’ possibility to avoid paying creditors (and in particular the payment of tax receivables) simply by declaring their insolvency would be drastically limited, according to… Mai mult

Phil Hogan: Swine fever in Romania has an impact on neighbouring countries and EU trade in pigs

Prime Minister Viorica Dancila, European Commissioner Phil Hogan and Agriculture Minister Petre Daea The swine fever epidemics in Romania has an impact on neighbouring countries,… Mai mult

Infrastructure projects lost EUR 41.5 million following budget amendment. In what projects cuts have been made

Despite the assurances that Dancila government is concerned and intensely working on the road infrastructure projects, at the budget amendment the Transport Ministry has cut… Mai mult

European Parliament have decided to adopt in October a resolution on the rule of law in Romania

Leaders of the political groups in the European Parliament have decided to adopt in October a resolution on the rule of law in Romania. The… Mai mult

"Romania's buffers have deteriorated, the country is less prepared for a negative shock" - IMF will reduce economic growth estimate

Romania will be less prepared if the economy is hit by a negative shock, as the structural deficit has been deteriorated - IMF representative for… Mai mult

Premiere: CSAT asks Finance Ministry to amend amendment - session suspended until Government comes with a draft that does not affect budgets of secret services

President Klaus Iohannis suspended on Tuesday the CSAT meeting for discussing the budget amendment, as there was no consensus on the budgets of institutions from… Mai mult