This is a repost of the interview with Gallina Vincelette, World Bank Country Director for the European Union, first published in the online edition of "Economedia.ro" on October 2, 2021.
Romania’s economy will grow by 7% this year, and the economy will fully recover after only one year of the pandemic, but there are a number of risks that threaten this forecast, such as insufficient absorption of European funds, rising inflation and, especially, vaccine hesitancy, said, in an interview for Economedia, Gallina A. Vincelette, World Bank’s Country Director for the European Union (EU).
Most important remarks:
- The pandemic has triggered the sharpest recession since the World War II in Europe.
- The pandemic was felt in Romania on many fronts, including investment, productivity, and eventually potential growth also may be affected.
- While the economy contracted by close to 4% last year, sectors like the IT sector have thrived during the pandemic.
- Our estimate is that additional 800.000 people have fallen into this category of at risk of poverty.
- A year from the start of the crisis, 7% of families report scaling down their food consumption in order to cope with the crisis.
- Romanian firms have become more pessimistic in the time of the pandemic than before. While in previous years they would expect sales to grow by say 7 or 8% on average in the future, between the two waves of the pandemic their perceptions of growth are of no more than 2%.
- 90% of Romanian firms today use digital technology. Impressively, more than 50% increased the use of digital technology during the pandemic.
- Our forecast this year for Romania is that the country will reach about 7% in 2021 growth rates.
- Romania is one of the very few countries in Europe that actually will fully recover its economy just after one year of the pandemic.
- There is a great opportunity for the country to really utilize its potential growth of 4,5%, even exceed that, should the utilization of very significant amount of European funds is done in a good way.
- Another thing to watch that can threaten the recovery is rising inflation.
- The third and what I might be probably the most important factor that could threaten the recovery is vaccine hesitancy. It’s one of the lower uptake in vaccinations in Europe and we see that almost 50% of the Romanian population is skeptical about getting vaccinated. This really can threaten the economic recovery.
- To have a successful recovery, the country will have to overcome its fiscal deficit. A large part of this deficit has a structural component. And this structural component links to reforms that can be undertaken to address this structural pressures. And some of these reforms very much relate to the pensions side, public wages, improvements in efficiency of the tax administration, closing tax loopholes.
Watch the full interview here.
