1. As an economist, what is your professional view regarding the economic development in Romania, in 2016?
In 2016, the GDP of Romania pulled off a spectacular 6% growth in Q2, three times above the EU growth of the same period with a 19% minimum wage growth, 6% unemployment rate and a -0.4% inflation rate. The GDP in 2016, according to various predictions, will probably be between 4.5 and 5.5%. All these numbers look very impressive on the surface, but as one of the best presentations at our 2016 annual conference, held by Mr. Dumitru Ion, CEO of Kompass Romania, revealed, these indicators are not produced by the most sustainable part of the Romanian economy. The vast majority of turnover (61.57%) and profits is produced by a very thin layer of big companies (2,840 companies, representing 0.62% of the total number of companies operating in Romania). The small and medium sized companies are somewhat less profitable than the big companies, but still more profitable than the vast majority of micro companies that put up the 83.49% of the number of companies in Romania and that produce an overall 2% loss instead of profit.
In conclusion, the overall numbers look very good, but the structure and the details of Romania’s economy should make us take these numbers with a grain of salt.
2. Can you tell us a few things about how The Hungarian Economists’ Society of Romania is contributing to the growth of the Romanian economy?
The most important thing that we do is bringing together the academia, the economic professionals and entrepreneurs in a community centered around economic questions. The Hungarian Economists' Society from Romania is an apolitical NGO focused on the professional development of its members. We pride ourselves with approximately 500 members in 10 local chapters, half of which are members of our youth fraction – young economists.
We have a professional library in Cluj-Napoca with 7,000 books, we organize trainings, roundtables and conferences in areas that are important for the professional development of our members. We also publish professional books, and organize a financial contest for high school students.
Our partners from abroad include the Hungarian Economic Association (Hungary), the Hungarian Economists’ Society from Voivodina (Serbia) and the Hungarian Economists’ Society from Slovakia. We regularly attend each other’s conferences, maintaining a living contact between our professionals.
We can say that the Hungarian Economists’ Society of Romania can be an important asset for those companies operating in Romania that are interested in extending their business in countries of the Carpathian basin.
3. Why do you think that employers find it more difficult to hire workforce in Romania?
This topic is increasingly present in our conferences and it’s somewhat puzzling that we have two simultaneous and antagonist phenomena: labour shortage and unemployment. Digitalization, one of the biggest present days trend requires a big quantity of developers and engineers, but at the same time it makes a lot of jobs obsolete. The human resources needed by the market, simply do not match the free workforce’s talent. This trend is expected to amplify in the long term.
Another important trend, that affects all countries in this region, not just Romania, is the emigration of skilled labour force. If and when this trend can be curved remains to be seen, but regardless, I think that the constant evolution of the educational system is very important for making sure that young people get the education they need in order to be competitive globally.
4. In your opinion, what are the engines for economic growth in Romania? What are external partners looking for in Romania and what is Romania still able to provide at competitive prices?
Unfortunately, wholesale and retail generate a big chunk of the Romanian economy (39%), and this fact suggests that the spectacular economic growth is a consumption based growth. The two sectors where I think Romania could develop true economic growth engines are the IT and tourism.
In the IT sector we have very skilled people, we have good internet connection, but the sector represents a small percentage of the total income produced in Romania. Another problem that should be addressed is the relatively small number of own products – the vast majority of the software companies work for outsourcing and that can be a vulnerability on the middle and long term.
In tourism, Romania has a big potential, but with the lack of long term vision, serious planning, KPIs, milestones, I’m afraid it could remain on this level of untapped potential. The natural resources and possibilities cannot compensate the lack of infrastructure, services and quality of the human resources.
5. How do your partners (internal and external) perceive the recent tax cut in Romania: is it rather a source of sustainable growth or a mixed source of growth and vulnerabilities?
Smaller taxes mean more money to reinvest that can be beneficial to the economy overall. One speaker at our yearly conference complained about the fact that decisions are taken with little or no extensive impact assessment. There’s nothing investors hate more than the constant fiscal and regulatory changes, that create a sentiment of instability, so if the tax cuts prove to be unsustainable we’re worst off than before, because it would mean a new wave of instability, lack of predictability, fiscal and regulatory changes. Unfortunately, history tells us that rules change often in our country, but if this time is different, it could mean an important backwind for the Romanian economy amid a general trend of lowering taxes across central and eastern Europe.
6. As a business leader, please make a statement about what the new administration resulted from the elections should bring for the business environment in 2017 and what the new administration should refrain from doing.
Some say that men mature when they stop expecting politics to solve their problems, but joking aside, the political environment can influence very much the economic development of a country. Truly significant investments require a long term to develop and mature. If there’s no long-term vision based on realistically attainable goals and milestones, comprehensive and inclusive enough so that a large part of the Romanian society endorses it, there will probably not be notable results. The thing that investors hate the most is instability of economic regulations.
If there’s no strategic, long term vision for the economy, the eventual good results of a year will vanish in midterm as there is no chance for consolidation.
