We have launched the second volume of the Economic@NBR project, at the current juncture dominated by multiple uncertainties and challenges, when economic policy decisions require coherence, consistency and rigorous substantiation. The volume brings together the most relevant indicators for Romania’s economic picture, as the nominal convergence criteria represent the quantitative matrix of sustainability benchmarks and provide the general framework for the selection of indicators.
Especially in problematic governing contexts, it is our responsibility to address the national economic priorities, with the specific thoroughness of the analyses conducted at the National Bank of Romania. At present, the major task of public policies refers to the lasting consolidation of public finances and restoring economic growth.
The benchmarks of the analysis stem from decisive questions for Romania’s economic future. What are the key challenges to the economic policies for better and stable governing? To what extent does the correction of imbalances quickly become the basis for lasting growth? What role do we assign to the balance between nominal and real convergence? How do we manage, in a European context, the security requirements and the need to strengthen competitiveness?
Economic@NBR helps shed light on such questions, through its objective of providing a research, debate and financial education platform, highlighting the prevailing challenges for the economy and the society in a national and European context.
Financial Sustainability – From Deficits to Nominal Convergence, the second volume of Economic@NBR, probably stands out as the most comprehensive analysis of the domestic economy’s imbalances and opportunities. The study provides essential benchmarks for substantiating Romania’s public policy avenues over the coming years.
The volume, printed in Romanian and English, is also available electronically and can be accessed here: Financial Sustainability – From Deficits to Nominal Convergence
The research highlights the fact that the recent quantitative progress proves insufficient in the long run, which calls for substantial transformations, for the economic progress to become sustainable as well. It is now time to enter the qualitative adjustments stage, as the restoration of economic and financial equilibria has become imperative.
On its European path, Romania needs clear objectives and consistently implemented national projects, the key challenges being the consolidation of public finances, financial sustainability and the return to robust economic growth.
We must be convinced that financial sustainability is the essential prerequisite for safeguarding macroeconomic stability and supporting long-term economic development. It is along these lines that I have coordinated the comprehensive, in-depth analysis of the most relevant topics, spanning ten interconnected chapters, for diagnosing imbalances, assessing vulnerabilities and outlining development prospects.
- Sustainability of public finances, by investigating the structural pressures on the budget deficit and the necessary prerequisites for a lasting correction of fiscal imbalances.
- General government revenue, from the perspective of the importance of improving collection capacity for the fiscal consolidation process and for strengthening the sustainability of public finances.
- General government expenditure, for understanding budget allocations, with a focus on the need to increase the education and health budgets.
- Social system imbalances, examined through the lens of the contributory principle, as well as in terms of the impact on the budget balance and social cohesion.
- Situation of state-owned enterprises, from the perspective of corporate governance, financial discipline, and the dependence on government support for some enterprises.
- Constraints of private sector companies, in terms of the implications for economic resilience, amid the persistence of capital shortages and arrears.
- Banking and financial system, assessed from the perspective of the development level and the financial intermediation capacity to support investment.
- External imbalances, reflected in the evolution of the balance of payments and in the external debt dynamics, amid the persistence of twin deficits as a major vulnerability.
- Management of general government debt, in the context of its fast growth over the recent years, given the importance of preserving the government’s financing capacity at sustainable levels.
- Nominal convergence, examined as an essential dimension of consolidation, alongside real convergence, for ensuring financial sustainability.
The research has highlighted both the challenges to Romania and its advantages, which are determining factors for our regional and European path. Financial sustainability calls for correcting the specific imbalances, but especially the structural gaps. That is why it is mandatory to ensure the institutional capacity to implement structural reforms responsibly.
I believe the strength of the volume lies in its holistic architecture based on the interplay between public finances, financial discipline, external position, public debt and nominal convergence, in an approach that transcends the fragmented perusal of existing vulnerabilities.
The analysis highlights key challenges for Romania’s economic policies in recent years:
- Fiscal responsibility is the prerequisite for sustainable consolidation. The balanced adjustment of deficits must be accompanied by policies that support productivity, innovation and the economy’s growth potential, within a coherent and credible public policy framework.
- Efficient collection of fiscal revenue is crucial for correcting imbalances in a lasting manner. In education and health sectors, resources need to be channelled to quality services, so as to ensure effective investment in human capital and sustainable development.
- Advancing investment, particularly from EU funds, safeguards the economy’s growth potential. Yet European funds depend on responsible governing, coherent policies and efficient management in implementing investment projects.
- The social equity and the sustainability of the public pension system rely on the contributory principle. Correlating contributions and benefits, increasing labour market participation, and private pensions ensure a better protection of income when retiring.
- Encouraging an adequate capitalisation level and stricter financial discipline underpin lasting growth and the economy’s resilience to shocks. It is important to consolidate effective mechanisms for the restructuring and orderly market exit of non-viable firms.
- The governance of state-owned enterprises must ensure financial discipline and economic efficiency. Competence-based management selection, quantifiable objectives, adequate capitalisation and transparency can mitigate the sector’s vulnerabilities.
- The sustainable development of financial intermediation fosters investment and ensures a better use of resources. This objective requires increasing the coverage of banking services in the non-financial corporations’ sector, developing the capital market and strengthening financial education.
Trade diplomacy and export-promoting strategies are essential for enhancing competitiveness and for correcting external imbalances. Enabling Romanian firms’ access to foreign markets and gearing exports towards high value-added goods and services can improve integration into global value chains.
Essentially, financial sustainability is not the mere outcome of some specific adjustments, but the reflection of a consistent path based on discipline and responsibility. Lasting convergence is inextricably linked to the quality of public policies, and the effective institutions are the rules centred on responsible decision-making and financial discipline.
Through the sheer scale of the topics addressed and the applied nature of the analyses, the second volume of Economic@NBR helps substantiate the economic policies that are so necessary for correcting macroeconomic imbalances, but also for consolidating the economic path and our resilience to future challenges.
The balance between nominal and real convergence is essential, because it is the only way to prepare the economy for the euro area requirements. Euro adoption can be Romania’s country project for the next decade, designed as a national strategic project, not merely as monetary integration mechanically anchored in the nominal convergence.
Romania’s joining the euro area should not be regarded as just a technical or formal exercise. It is a profound process of economic and institutional reaching maturity, meant to act as a catalyst for the structural consolidation of the economy, a more in-depth trade integration, the strengthening of financial resilience, as well as for the increase in welfare and living standards in the society. In this context, the euro becomes the reflection of national maturity in the architecture of European convergence.
