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Consultant și analist de risc politic, CEO Smartlink, fost Policy Manager la Google Bruxelles

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Hitting at or above our normal weight in crisis 

 The health crisis has led to an economic crisis, which has forced states to take large-scale measures and investments to reduce the rate of new coronavirus infections and to support the weakened national economies.
editorial radu magdin_ok

It is no surprise that Romania has been severely affected by the economic crisis caused by the global spread of Covid-19. This crisis has accentuated the major problems that existed before and highlighted vulnerabilities that diminish Romania’s resilience and do not allow sustainable development.

In this article we will look into how Romania can recover quicker with the help of the private sector and a roadmap of well-established targets.  

While net exports will continue to make a negative contribution to the Romanian economy, the slowdown on economic growth will gradually diminish in the next year. The recently announced figures about the performance of the national economy in the last quarter of 2020 are rather encouraging, provided that a new dip is not on the horizon. Overall, the pro-cyclical character of the economic policies that were implemented in Romania between 2017 and 2019 is probably one of the elements that highlight the fragility of the economy in the face of external shocks (such as the current health crisis). Thus, it is necessary for Romania’s economic policies to be based on investments that will lead to the gradual correction of the current chronic macroeconomic imbalances and ensure long-term sustainability, while addressing structural weaknesses in education, healthcare, and the quality of infrastructure.

The first solution in reducing vulnerabilities, from a government perspective, is to include strategic investments in the National Recovery and Resilience Plan to correct imbalances and align the domestic economy with the objectives and guidelines of European ecosystem development.

The national projects, which will be proposed to the European Commission, must be in line with those of the Commission, but it is necessary for Romania to have a certain degree of flexibility, as projects that Romania had to complete so far and not concluded are the main source of “socio-economic delays” (e.g., poor transport infrastructure – highways). Romania has to act smart, to have a clear idea about its three-year priorities, and to see what of these objectives can be financed through this mechanism.

Last week Romania assisted in the reactivation, as an exception for Moldova, of the European Civil Protection Mechanism, through which the EU can help countries with donations. Romania was the first EU country to react immediately to Moldova’s request for help in fighting the pandemic.  These are the types of activities that we should aim for, pointing out to our fast reactions to the needs inside and outside the EU while collaborating with the private sector in developing European solutions.

As the government is busy with the national resilience and recovery plan and all the buzz is around these planning and political events, the private sector should compensate and switch their focus on real involvement in improving their businesses inside and outside Romania.

Companies should plan in advance their supply chains and ensure their growth is not limited by the government support capabilities.

In building their networks, entrepreneurs should invest time and effort in creating a good image outside Romania. This will give them the opportunity for long term partnerships that will generate new business opportunities, and on the long-term new investments in their activity back at home – in Romania.

It is crucial that more and more Romanian companies expand outside our borders and create strong partners, while exchanging know-how. In the European Union our companies can represent a voice for their sector, attach themselves to international business organisations and, why not, influence the EU decision making process through lobby and by expressing their opinions on the issues discussed at the EU level.

The government, by increasing economic competitiveness, can ensure the preconditions for sustainable development and can boost the attractiveness of the economy, directly for companies, and indirectly through companies, for the workforce. Depending on the identified and supported competitive sectors, the economy increases its attractiveness in a controlled and predictable way for those highly productive segments of skills. Attracting such highly qualified and highly productive human resources will have an important multiplier effect, as it will allow the development of other economic sectors that provide services necessary for the quality of life expected of such individuals.

There is a need to build clear strategies to support entrepreneurship in certain sectors that will ensure the development of the domestic economy and also allow it to interconnect in the most efficient way with the European ecosystem. In this way, the development of the domestic entrepreneurial ecosystem will have second round results becoming a regional catalyst for the development of the community ecosystem.

While the government helps in this regard, the real competitiveness and attractiveness of our economies starts from the current companies and entrepreneurs in our market. At a corporate level, discussions between companies are more fruitful for new business opportunities and expansion. Our country’s firms can attract new investors easier than our government can through diplomacy and policy. Finding a partner in Romania that you are able to do business with ensures already part of the success of the investment in the country.

In the years to come, we will need to pay more attention to budget expenditures given the challenges we face. We will need to optimally manage budget expenditures, so that Romania continues to benefit from a sovereign rating favourable to investments. It is important to mention that Romania’s economy is extremely sensitive to external fluctuations, and entering a recession, political instability or populist economic policies can send Romania into the category of countries where investments are not recommended, those in the non-investment grade category. At the same time, Romania has to pay closer attention to its growth engine and increase the quality of the public services – otherwise, it will see its skilled workforce leave the country for the West, as it has regularly done in the past 15 years.

Romania should at least target to be a middle European power, making its voice heard in the EU and ensuring our businesses have the right tools at their disposal to expand and attract more investors.

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