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Can the Romanian Economic Miracle Last?

Experts say high growth rates on the back of government handouts are unsustainable.

15 February 2018

Not long ago, local and international media were full of reports on Romania’s stellar economic growth.


Experts and the European Union, however, are sounding the alarm about whether the growth is sustainable, according to a report by AFP.


The concern is that the strong numbers are almost solely attributable to wage hikes and tax cuts, and coupled with a failure to properly invest in infrastructure and other sustainable public projects, Romania’s boom could be set to slow.


"Economic growth is not always synonymous with development," says Cristian Paun, associate professor of international finance at the Bucharest University of Economic Sciences.


Romania’s economy accelerated in 2017, with real GDP estimated to have grown by 6.7 percent, according to a European Commission country report. Compared with the EU average – 2.4 percent – it is an unquestionably strong performance.


But the report goes on to say that the growth was driven by private consumption, spurred on by tax cuts and wage hikes.


Shoppers browse at a store in Bucharest. Image : Britchi Mirela / Wikimedia Commons


To pay the bill, the state cut spending for highways and other public works, and the fear is that despite generating a momentary jolt of economic activity, the country will be left indebted and vulnerable, according to The New York Times.


“We are making the same mistakes as Greece,” Paun told The Times last year. “We are still continuing to increase the public debt when we are in a boom.”


As AFP notes, Romania’s transportation infrastructure shows the results of under-investment. Romania came 128 out of 138 countries for the quality of its road infrastructure in the latest World Economic Forum Global Competitiveness Report, cited by the Guardian.


There are further concerns of overheating. Inflation hit 4.3 percent in January – its highest level in four years – and is expected to continue in 2018, according to the European Bank for Reconstruction and Development, cited by AFP.



  • As is true elsewhere in Central and Eastern Europe, part of Romania’s economic growth can be attributed to a thriving tech industry. According to a Guardian report last year the tech sector is expected to double its share of GDP to 12 percent by 2025, aided by one of the fastest broadband internet speeds in the world and a labor force equipped with excellence in science, mathematics, and languages.


  • Last October, 8,000 doctors, nurses, and other medical staff protested in Bucharest against the government’s planned fiscal changes, including public wage hikes, on the grounds that the additional social security payments would cancel out the wage increases. The protests were part of a wider wave of protests in Romania over corruption and political instability.
Compiled by Kate Syme-Lamont
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The Moldovan Diaries is a multimedia, interactive examination of the country's ethnic, religious, social and political identities by Paolo Paterlini and Cesare De Giglio.

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