SIMILAR ARTICLES

What Romania exported and imported in 2017. Some observations

According to INS data, last year, the automotive industry was the driver of Romanian exports, with about EUR 9.6 billion, of a total of EUR… Mai mult

Real salary goes “down to Earth”. Health and education are still Cinderella

The average gross salary earning announced by the INS for February 2018 was 4,128 lei, 0.4% lower than in the previous month. Paradoxically, the net… Mai mult

EU tax harmonization plan may have negative effects on Romania. Bucharest – totally unprepared

European authorities are taking increasingly decisive steps towards tax harmonization of the 27 systems remained in the EU, but the new measures may have negative… Mai mult

Beware of who bears the burden: Atypical arrangement of wage cost increase in Romania in 2017

Romania ranked first in the EU in 2017 by the labour cost increase, according to data published by Eurostat. With an increase of +15% in… Mai mult

A ruthless table: Number of Romanians who obtain citizenships in other EU countries is growing more than those who run away from dictatorships

The number of Romanians who obtain citizenships in other EU countries keeps growing. Only in 2016, 29,700 people swore to another member state, compared to… 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

Industrial production, up 7% in first two months of 2018, compared to the same period of last year

Industrial production (gross series) was up 7% in the first two months of 2018 compared to the same period in 2017, following the growth in… Mai mult

Deloitte study: Romania vs. EU - Tax rules applied to losses from selling bad loans

Deloitte Romania, at the request of the Romanian Banking Association, conducted a study for analysing the tax treatment of the sale of receivables and the… Mai mult

Transgaz, favourite to take over Greek natural gas transport operator

The US and the EU support Transgaz-Reganosa (Spain) offer to take over the Greek natural gas transport operator DESFA, for geopolitical reasons, the Greek media… Mai mult

Workforce (i)mobility: Unemployed young Romanians are not willing to move to another locality for a job

Romania has one of the highest percentages of young unemployed people who would not leave their hometown to find a job (either in the country… Mai mult

Unions: State will pay detainees between EUR 370 -550 million

Total compensation that the state will pay to detainees who have been imprisoned in improper conditions will be between EUR 370 million (in the case… Mai mult

Schweighofer sells forest domains owned in Romania and only keeps processing activities

Schweighofer Group, one of the European leaders in wood processing, announced on Monday "a strategy change": it sells its subsidiary Cascade Empire S.R.L. (Cascade Empire)… Mai mult

Dancila government has established "Commission for Preparing Changeover to Euro". Another committee has been already doing the same thing for a year and a half

On Wednesday, the Government adopted an Ordinance aimed at establishing a commission for preparing the timetable for Romania's accession to the single European currency. Prime… Mai mult

Mangalia Shipyard: Agreement between Ministry of Economy and Damen. Dutch buy Daewoo shares, give state 2%

The state has reached an agreement with Damen Shipyards Group after blocking for several months the takeover by Dutch company of Daewoo's shares at Mangalia… Mai mult

CCR judges are no longer willing to participate in MCV assessments

The President of the Constitutional Court (CCR) has communicated to the European Commission (EC) delegation the fact that "the Court plenary expressed its wish not… Mai mult

Five priorities of the Coalition for the Development of Romania presented to Dancila government

Representatives of the Coalition for the Development of Romania (CDR), an initiative of the Romanian business community coordinated since the beginning of this year by… Mai mult

Romania to host regional centre for endowment of Black Hawk helicopters for Central Europe

Romaero and American company Sikorsky, part of the Lockheed Martin group, have signed an industrial partnership agreement that will lead to the establishment of a… Mai mult

State-owned companies forced to participate in public tenders

The Government approved on Thursday a memorandum that includes a series of measures targeting publicly owned or controlled companies. Basically, the document forces the state-owned… Mai mult

Country Report - European Semester: Romania risks a tough economy landing at change of cycle, because of growth model

"In the absence of structural reforms and fiscal consolidation, Romania's strong economic growth risks creating the conditions of a tough landing," in case of a… Mai mult

Governance and Congress: Prime Minister Dancila appointed PSD Vaslui and Neamt leaders’ sons as state secretaries

Prime Minister Viorica Dancila, who is aspiring to the position of PSD executive president, promoted the sons of PSD Vaslui and Neamt presidents to government… Mai mult

Monopoly on natural gas market in Romania: Interests supported by deputy Iulian Iancu push Romania to an open conflict with European Commission

The European Commission will sue Romania at the European Court of Justice if the Parliament in Bucharest adopts the amendments to the Emergency Ordinance 64/2016… Mai mult