Romania is currently at its all-time peak of wellbeing, with the highest GDP/capita compared to the European average and with an actual individual consumption exceeding that of Spain.
The results are plainly visible – while statistics show that, despite the inflation (being the highest in the EU), consumers’ confidence remains high.
However, the biggest problem is the extremely vulnerable mechanism through which we obtain this GDP/capita as well as this spectacular actual individual consumption – galloping far ahead Romania’s development:
While we are close to the EU average in terms of consumption and the GDP it produces, we are still far away from the development that should sustain this wellbeing: here are 5 figures that force us to face the question “how long can we keep up this level in the absence of development?”
1 Wellbeing euphoria
There are two indicators at the root of the wellbeing and enthusiasm of those who believe that this state will persist without development:
1. GDP/capita: 80% of the EU average, according to Eurostat.
We surpass Greece, Hungary, Slovakia, Croatia and Bulgaria in terms of this indicator.
2. Actual individual consumption – 89% of the EU average, according to Eurostat:
We surpass Spain, Portugal, Poland, Hungary, the Czech Republic, Slovakia, Bulgaria with respect to this indicator.
But how does the economic mechanism supporting this GDP/capita and the actual individual consumption look like? And how will we be able to fill the gap between wellbeing and development?
We are banking on considerations listed below:
2 Development delay
While we are close to the EU average regarding GDP/capita and actual individual consumption, we stand very far off economic parameters that produce and sustain the two indicators, and the discrepancy will have to be compensated because it will cost us.
We selected only 5 such parameters considered relevant for the economic stability sustaining the current historic prosperity:
1. Work productivity: 30% of the EU average.
Romania is a leader in terms of productivity growth, but is second to last when it comes to final value: EUR 15,000/employee against the EU average of EUR 47,500/employee.
2. Resource productivity: 38% of the EU average.
Resource productivity in Romania actually shows the disconnection of the GDP from economic efficiency. Resource productivity points to the quality – and not just the quantity – of economic growth. This translates into technology. For instance, Poland reached 60% of the EU average.
3. Administration digitalization – DESI coefficient: 40% of the EU average. This is the last position in the European Union. Romania’s score is even worse but it is improved by our high ranking in terms of internet speed.
4. Education system allocation: 67% of the EU average.
The results of which are and will continue to be visible: 40% functional illiterates, underdeveloped country level in PISA tests, a big problem for a technological economy in the future.
5. Research & Development allocation: 25% of the EU average in the private field; 7 (seven)% of the EU average (EUR 19/capita compared to EUR 244/capita) in terms of state allocation:
Subsequently, in the absence of expenditure/investments for Research-Development, we will not be able to improve either productivity per employee or resource productivity.
We will keep to these 5 indicators and comparing them against the EU average in order to note the significant difference between the level of wellbeing in terms of European average and the development that must sustain this wellbeing.
There are other indicators, however – very visible even beyond figures:
– the speed of our trains (essential for the economy) and travel conditions;
– the state of our hospitals (NOT those in Bucharest and in other 4-5 large cities) and the number of preventable deaths (a statistic in which we rank high among EU countries), as well as a healthy and economically productive life expectancy;
– enterprise indices – in terms of which we stand at less than half of the EU average of SMEs/1,000 inhabitants;
etc, etc.
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Romania has less than 5 years to correct this discrepancy between wellbeing and development, all the more so since this difference is supported by 3 sources that could decrease sharply or even disappear: loans, European funds and sums sent in by Romanians living abroad.
European funds could in turn diminish significantly after 2027, when the next financial framework of the EU begins, under the pressure of financing new states on the verge of joining the Union (Moldova, Ukraine and other countries in the Western Balkans region) and of increasing military costs; we could even become net contributors.
Annual remittances worth billions of euros by Romanians living abroad are in question: a large part of Romanians abroad are preparing for retirement, while the generation of children born abroad with no connection to Romania grows larger.
Loans are already on the rise and they will become more expensive if Romania does not manage to seriously decrease its twin deficits, especially since the government bonds frantically issued in these years will reach maturity.
This situation could explode at any moment given an external crisis of any kind, not to mention the need to increase military expenditure in coming decades.
Yes, there are opportunities on the horizon, but they will not seize themselves:– a reconstruction hub for Ukraine;
– the internationalization capacity reached by local capital;
– the opportunity to become a regional energy hub by detecting a smart energy equation based on current resources and investments. However, these opportunities will require the improvement of indicators listed above in order to be seized: Romania must also see the empty half of its glass so it might escape the euphoria of consumption built on quicksand. And it must fill it quickly: in any case, we will foot the bill for this gap between wellbeing and development over the next 3-5 years – if we have peace and keep away from crises, that is.
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