Romania’s economy lacks innovation, relies too much on domestic consumption, has wide regional disparities, a trade deficit, an aging population, the risk of poverty and acute labor shortages, according to an analysis by the Confederation of Concordia Employers.

The document they published implies the idea of ​​finding solutions to increase the productivity, complexity and competitiveness of the Romanian economy in the complex context of the dual green and digital transition.

The key figures we are starting with show an economy that has quickly recovered some of the gaps, but could lose momentum if the economy’s serious difficulties are not quickly addressed and if it does not adjust its trajectory towards a green and digital economy in time. .

Even as Romania’s economy has grown eightfold in 20 years, other countries in the former socialist bloc have followed a similar path, according to Concordia’s analysis. Ten of the 11 countries with the greatest economic growth over the past decades in Europe are Eastern European countries.

When we discuss the elements that contributed to this economic growth, we cannot avoid the fact that 78.8% of the almost 286 billion euros generated by the economy in 2022 were given for consumptionand the average contribution of consumption over the last 8 years was almost identical – 78.5%.

Although some of this consumption was destined for manufacturing, including for export, the data show a large imbalance for several of the product categories we are talking about in this analysis.

Although a high share of consumption in GDP is not unusual for advanced economies, Romania is surpassed only by Greece and Portugal in the contribution of consumption to GDP, each with 64% and 68.7% respectively, compared to Romania’s 63.3%. in 2022. The EU-27 average was 52.3%, and among countries with comparable economies, Hungary recorded 49.9% and Poland 56.7%.

From the structure of the gross domestic product to the labor market and the capacity to innovate, Romania faces obstacles that it must overcome in order not to be left behind in the new phase of transformation of the global economy.

Labor productivity has significant gaps compared to the European average, especially in the industrial sector. In addition, the Romanian economy faces labor shortages, rising labor costs, significant regional disparities and deep social inequalities.

With this analysis, Concordia Employers’ Confederation is starting an approach to increase the added value of the Romanian economy. With the involvement of members from 15 sectors and interested partners, the analysis is the first step towards the development of several sectoral public policy documents that will propose concrete solutions.

Some of the issues reported by the Concordia Confederation are:

• The deficit of the trade balance makes a negative contribution to the formation of GDP by more than one percent every year. The trade deficit increased by 3.5 times in 10 years, reaching 34 billion euros in 2023.

• The competitive advantage based on cheap labor is rapidly disappearing, and the cost of labor has registered the second highest increase in the EU in the last 4 years.

• Productivity is rising, but the gap with competing economies remains.

• The value added per employee in the Romanian industrial sector is only 26% of the EU average.

• The employment rate is the third lowest in the European Union.

• Romania has the lowest proportion of university graduates and the third lowest employment rate of recent graduates among EU member states.

• The number of vacancies is increasing, vertical differences between the level of education of employees and the requirements of employers are growing.

• Although the country has experienced accelerated economic growth, the country is classified as an emerging innovator in the European Innovation Scoreboard (EIS), a classification that actually shows a poor position compared to other European states. Investment in research and development (R&D) is low and most companies have limited innovation capacity. High-tech exports account for a small fraction of total exports, while Romania imports a significant portion of technological value.

All these structural constraints appear in a context in which the economy must also adapt to climate change, in line with carbon reduction targets, while new technologies are developing at an accelerated pace. Thus, the economy must readjust to increase added value with the introduction of new technologies, lower consumption of primary resources and lower emissions.

The next year, marked by four rounds of elections, will be a turning point in the formation of a clear vision for Romania’s economic development. To support this vision, Concordia will publish a series of industry analyzes to complement the recently released report, which will result in concrete and actionable proposals for public policies and measures to increase the added value of the Romanian economy.

From 1990 to today, Romania’s gross domestic product (GDP) has grown nearly 8-fold, reaching approximately €286 billion in 2022, and is set to exceed €300 billion in 2023.

During the period 1990-2021, Poland’s GDP grew 10 times, Hungary’s – more than 5 times, the Czech Republic’s – 7 times, Bulgaria’s – approximately 4 times. From 1990 to 2021, global GDP also increased by about four times.

Despite significant growth in Romania’s GDP over the past three decades, the economy and society face a number of challenges that threaten growth and well-being in the coming decades. Romania needs a new approach to maximize its economic potential, the authors of the analysis also argue.

See the full Concordia Employers Confederation analysis here