The economy needs to grow because more and more efficient production, not because people consume more, and in the long run healthy growth means more value created in the economy, according to the President of the Romanian-German Chamber of Commerce and Industry (AHK), Volker Raffel.
„A transition from consumption-led growth to sustainable growth is needed. Macroeconomic analysis clearly shows that economic expansion in recent years has been driven mainly by consumption, fueled by increases in wages - especially the minimum wage - and pensions, without the economy's productivity keeping pace. The consequences are direct: high inflation and pressure on the public budget. Such a model is unsustainable and was bound to come to the end of the line, regardless of the government.
On the positive side, it can be replaced by a more robust growth model based on investment, production and competitiveness. In short, the economy has to grow not because people consume more, but because more and more efficient production takes place,” Volker Raffel told Agerpres.
He added that this means more investment in infrastructure, energy and industry, boosting productivity through technology and workforce skills, developing exports and targeting high value-added areas such as technology, innovation and energy.
„In the long run, healthy growth means more value created in the economy. This is how pensions, wages and consumption can also grow, if they are based on healthy economic growth,” said the head of AHK.
He underlined that Romania has taken important steps to strengthen its macroeconomic stability and, although the international context is still volatile and domestic challenges remain, there have been visible improvements in investor confidence and capital markets.
„It is essential to continue the reforms we have started in order to maintain this positive momentum and increase the country's economic resilience. The recent rating from Fitch, which maintains Romania's investment grade, is a call for caution. A stable political climate and continued reforms will contribute significantly to sustainable economic growth and attract long-term investment,” explained Volker Raffel.
In his view, the current economic recovery programme was a very good starting point, but while some tax increases were necessary to stabilize essential state functions, the exchange rate and investor confidence, they needed to be accompanied by five key directions.
Thus, tax increases, to the extent that they are unavoidable, should be targeted at the outcome of economic activity, not applied before it (such as the MCI), as such measures slow down the economy.
Other necessary directions include: reducing and streamlining public spending; cutting red tape, which not only generates costs for the administration and companies, but also slows down the economy as a whole; and ensuring that the state complies with its payment obligations.
„Del delayed payments to the private sector - in areas such as health, construction, agriculture, energy and others - can lead to slowing economic growth or even bankruptcies and job losses. There has been some improvement in recent months, which needs to be continued”, AHK Romania's president said.
According to him, the fifth direction refers to the economic recovery measures currently being implemented, such as the Tech-up scheme, which is one of the most important measures to stimulate research and innovation, the simplification of the Single Declaration procedures, as well as the VAT reform, which will contribute to improving liquidity and fiscal predictability for economic operators.
Raffel warned that Romania is facing a transition specific to the „middle-income trap”, i.e. moving from a competitive advantage based on low wages to one based on quality, productivity and innovation.
„As the wage advantage is shrinking, and Romania has reached more than 80% of the EU average in terms of GDP at purchasing power parity, there is a risk that the convergence process will slow down. This is why investment, innovation and productivity growth become essential,” the head of AHK said.
He stressed, however, that it is a positive sign for Romania's economy that the country's attractiveness has increased and that part of the diaspora has returned in 2021-2023.
„I am convinced that this trend can continue. Despite the low birth rate, the population was growing slightly during that period. However, in the context of labor shortages - especially in technical and manual trades, where even artificial intelligence cannot make up for the lack of personnel - stronger policies are needed to support families, reduce school drop-outs and increase the birth rate to a stable level. I wish we could create a friendlier society in this respect. From an economic perspective, the low birth rate limits growth potential, as recent NBR analyses show. At the same time, depopulation generates social frustrations in certain regions. The economy is ultimately about people,” said Volker Raffel.
On the other hand, as far as public administration is concerned, he believes that savings and increased efficiency are needed to streamline its work.
„For example, full digitization and interlinking of procedures at the national level would allow companies to submit documents only once and be able to transparently track the status of applications. Equally important are the standardization of deadlines and requirements across all institutions and localities; strict enforcement of legal deadlines, including through the principle of tacit approval; professionalization of the administration through competitive salaries for key specialists; and predictable compliance with state obligations, especially payment deadlines and regulatory stability. These measures would reduce costs, accelerate investment and increase business confidence. I believe that it would be useful to identify a form of cooperation between the public and private sectors to accelerate digitization,” the AHK official said.
He believes that a well-functioning economy and society need a well-functioning state and it is essential for Romania's economy that the state consistently follows its strategies, with competent experts monitoring them, with strong and credible institutions and to avoid creating bottlenecks when it comes to authorizations, timely payment of EU funds for successfully implemented projects, etc.
„It is therefore in everyone's interest that the Romanian state attracts and retains highly qualified specialists in the relevant ministries. The digitization of standard activities should create budgetary space to pay competitive salaries for these essential skills,” Raffel conveyed.
He also noted that energy is at the heart of the economy, both for traditional and new sectors such as data centers. For this reason, the development of generation capacity, storage and investments in networks remain essential to ensure energy security, economic competitiveness and future development.
„Every additional €1 invested in networks has a 10 times greater impact on the economy. The effects of these investments are correlated with an increase in consumption, increased access to energy for investors, which means stimulating the development of new production facilities, new jobs, higher contributions to state and local budgets, etc. We see increasing electricity and gas production capacities on the horizon, but investments in renewable energy and batteries are already in full swing, and all of this requires investments in networks as well. Establishing the right regulatory framework for the future development of electricity grids will bring immediate economic benefits,” the official said.
He added that a balance must be struck between the interests of the state and those of consumers, while at the same time ensuring the financial sustainability of distribution system operators, i.e. their ability to make investments.
„And I see no contradiction in this. If this balance is struck, customers will benefit from cheaper energy due to the increased share of renewables, while higher consumption will also mean a lower distribution tariff in money/kWh and a further improvement in service quality, and the economy will benefit from additional investment, leading to the removal of bottlenecks in industry growth, more jobs and higher revenues for the state budget other than from new taxes. For this, appropriate incentives are needed for distribution operators to make investments that proactively address expected market developments, and looking beyond immediate needs. Failure to ensure a favorable and incentivizing regulatory framework risks driving capital to other markets that have understood the importance of energy infrastructure,” the President of the Romanian-German Chamber of Commerce and Industry pointed out