Iohannis: The time of trial for the economy is not over

On Wednesday, President Klaus Iohannis sent remarks to the "National Ranking of Romanian Companies 2021 - The Economy in Moving Along" in which he emphasises that the time of trial for the economy has not ended, and the new government will also have the task of resuming open, constructive dialogue geared towards a sustainable growth of the economy.

"We all know that the time of trial for the economy is not over. The new government will have, among other things, the task of resuming an open, constructive dialogue aimed at the sustainable growth of our economy. In this time of economic recovery, we need to consolidate Romanian capital and draw in new investment centred on added value. The business community needs quantitative performance, but especially quality ones, so that small and medium-sized enterprises and large companies can evolve with ambition and vision for the economy of the future," Iohannis says in the message delivered by presidential adviser Cosmin Marinescu at the event organised by the Chamber of Commerce and Industry of Romania.

Iohannis argues that the economy "is moving along and Romania must move forward, on a path of sustainable development, through investment, innovation and digital transformation, through the use of European funds, and also through an honest relationship between the government and the business community."

According to the head of state, the companies included in the national ranking are examples to follow in terms of performance and resilience.

He shows that, in 2020, the decline in the Romanian economy was smaller, and this year recovery is more intense compared with most countries elsewhere in the European Union.

"The constant dialogue and collaboration between decision makers and the business community in the year of the pandemic, intensely supported also through the involvement of the Presidential Administration, was the necessary recipe in an extremely complicated period."

Iohannis says that, as the national ranking shows, the most profitable companies amidst the COVID-19 pandemic were those in the industry, despite falling turnovers and profits.

"Trade, especially online trade, as well as IT&C, had a positive, predictable dynamic. The sector most affected was tourism, but it has gradually begun to recover this year," said Iohannis.

He adds that the increase in net investment in the economy by more than 10% in the first half of the year reflects, in general, the objective of moving from a consumption-based model to investment-based growth, but in that respect and at this time, public investment from national money and the absorption of European funds are still depending on the estimates in the national budget.

"In terms of GDP dynamics, the growth in 2021 will be consistent, above the estimates made during the year, but global projections show that this post-lockdown recovery effect will gradually attenuate. The slowdown in economic growth, estimated for the coming years, calls for structural solutions to our economy. The imbalances the economy is currently facing undoubtedly indicate the need to change the pre-pandemic paradigms. In terms of external imbalances, a continuing widening in trade deficit and government deficit is worrying even against the peaks of last year. At the same time, against a backdrop of rising commodity and energy prices, we are facing soaring prices, and inflation, which reached 7.9% in October, raises serious problems. Inflation seems to have suddenly become again the main risk to financial stability globally," he says.

Iohannis adds that Romania needs a more in-depth analysis of these developments and concrete, pragmatic and sustainable measures to consolidate its economic growth and support the living standards of its citizens.

"The economy is moving along, but we need to make sure that it is not by rolling imbalances, but by reforms and policies focused on sound development goals. We need to take the right direction, a clear path and effective implementation mechanisms to return to the goals of sustainability. Beyond the urgencies of the present, we have essential stakes in the medium and long term," says Iohannis.

President Iohannis underscores that the challenges of fiscal consolidation need to be managed prudently so that the national government deficit and public debt do not place additional constraints on future economic development.

"That is why the 2022 budget becomes an essential tool for the implementation, in the post-crisis time, of a sound financial concept for Romania. That must be designed around the objective of absorbing European funds and as a multi-annual budgetary framework in relation to what we have set in terms of European funding. Moving forward, 13% of the non-reimbursable amount allocated to Romania under the National Recovery and Resilience Plan (PNRR) will enter the country as pre-financing. It is the sign that we have to prepare with utmost seriousness the implementation of the projects pledged," Iohannis says.

Iohannis adds that Romania also has to recover its preparation of the multiannual financial framework.

"Romania could attract over 30 billion euros under operational programmes, but at the end of 2021 priorities and programming are still being discussed. Discussions are needed, negotiations are good, but, realistically speaking, the Romanian economy and society need concrete results at the opportune time. An infrastructure that generates horizontal development, security and energy independence, the skills of the future and technological innovation in production processes are clear objectives, already taken up. In the years to follow the capacity to implement both the investment projects and the necessary reforms is the key challenge we have to face," he concludes.