The political risk associated with the 4th round of elections is, in my opinion, the most pronounced risk this year.

Political (difficult management actions), economic (inadequate policies and hidden imbalances), social (tensions and economic costs) follow from this, says BRD Chief Economist Florian Libokor in a dialogue with HotNews.

I do not support the ideas that are being spread about the risk of the war in Ukraine spreading beyond the borders of Ukraine, on the contrary, I believe that 2024 could be the year when it will end. We could better understand the “chemistry” of these conflicts, without diminishing their significance, if we made a foray into the past to observe both the stages and rhythms of development, as well as their drivers and obstacles, Libokor believes.

Rep.: In your opinion, in 2024 there will be a soft landing of the economy in Romania, a hard landing or no landing at all (“the plane” will approach the ground, but take off again)?

Florian Libokor: The global trend, according to the World Bank, indicates that 2024 will be the third year in which the pace of the world economy will remain positive, but will decrease as a dynamic by 0.2 percentage points, to 2.4%, corresponding to an average growth of 0 .75 percentage points below average growth over the past 14 years. These growth rates are unevenly distributed, with emerging economies growing more than three times faster than developed economies (3.9% versus 1.2%).

We see that the indicators of agriculture in 2023 do not coincide with the indicators of agrarians, and this naturally raises questions.

Romania’s economy will generally respect these trends. Given the dynamics of GDP in 2023 (+2.0%) and the fact that we still maintain our last year’s estimates for 2024 (+3.4%), we cannot talk about the economy landing. The currently available data do not support such a scenario. New data will be released during this quarter, and then the economic forecast can be adjusted if necessary.

Representative: Which sectors of the economy may shrink in 2024, and which may “take off”?

Florian Libokor: All sectors of the economy seem to be doing well this year. The slowdown is likely to be seen in the construction sector. The agricultural sector remains in question. Here we saw an amazing growth in 2023. However, with the transporter and farmer demonstrations, we also see the fact that the agricultural performance in 2023 does not match the farmer performance, and this naturally raises questions.

From the point of view of the labor market, the big problem is not the unemployment rate, but some details

Rep: What level of economic growth is expected for 2024? What about the unemployment rate?

Florian Libokor: As we noted above, we currently maintain our estimate of economic growth at 3.4% through 2024, and we see the unemployment rate rising slightly to 5.8%. From the point of view of the labor market, the big problem is not the unemployment rate, but some details. For example, the negative demographic trend of the last 14 years (population decreased by approximately 1 million people), a consequence of aging, negative natural growth and migration (about 5.8 million people).

Romania ranks second in the European Union in terms of the inactivity of the working-age population (about 4 million people, which is equivalent to 33.2%).

The most serious, from my point of view, is the fact that in the 20-34 age group we have a share of around 23% of people who are not in work, education or training, one of the highest figures in the EU (where the average share is 15%).

Perception is an aspect that is not the most objective, but it cannot be ignored either. What I think really matters is stability as a state of affairs

Representative: Given the geographical differences and the high dispersion of the performance of different sectors of the economy, do you think that some sectors may experience weak economic growth due to the recession?

Florian Libokor: Perception is an aspect that is not the most objective, but it cannot be ignored. What seems to me to be really important is stability as a state of affairs and a basis for the future. When I say this, I mean the evolution and assessment of the difference between achieved economic growth and the potential for economic growth.

For example, the potential growth for 2023 is estimated at about 4%. Let’s assume that in 2024 it will also remain at the level of 4%.

Growth below potential means unrealized opportunities, underinvestment, unused capacity, unrealized development, etc. These are just a few examples, but with significant implications. Then, you can say, let’s make efforts to grow more economically.

The political risk associated with 4 rounds of elections is, in my opinion, the most pronounced risk this year.

Very well, however, economic growth above potential can mean, among other things, an overheating economy or, if you prefer, inflation and external deficits, especially if the engine of growth is consumption rather than net exports or investment. And I ended with the key word: investment. It is a “seed” that, if you “plant,” creates the potential for healthy growth.

Rep: What are the biggest economic risks you see for Romania in this election year?

Florian Libokor: The political risk associated with the 4th round of elections is, in my opinion, the most pronounced risk this year.

Political (difficult management actions), economic (inadequate policies and clear imbalances), social (tension and economic costs) follow from this.

I do not support the ideas that are being spread about the risk of the war in Ukraine spreading beyond the borders of Ukraine, on the contrary, I believe that 2024 could be the year when it will end. We could better understand the “chemistry” of these conflicts, without diminishing their significance, if we forayed into the past to observe both the stages and rhythms of development, as well as their drivers and obstacles.

For example, in 1600, when Michael first united the Romanian principalities, Giordano Bruno was burned at the stake in Rome’s Campo dei Fiori because he argued that the universe had no boundaries and, quite possibly, no center either. After 318 years, in 1918, the Romanian principalities were united again. 424 years later, in the year 2024, there are still people who believe that the Earth is flat, and if you insist on going all the way, you might accidentally fall off it.

No, it’s not a joke, it’s as real as Giordano Bruno’s last words “To burn is not to deny!” / To burn does not mean to renounce!”

N. Ed: Mr. Libokor’s statements were made on his personal behalf, without connection with the institutions with which his eminence is connected.