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HomeEconomyWith help from EU funds, Romania quietly catches up with rich neighbor

With help from EU funds, Romania quietly catches up with rich neighbor

By Luiza Ilie and Gergely Szakacs

BUCHAREST (Reuters) – Romania’s economy will outstrip its stagnant neighbor this year, boosted by EU funding, currency stability and Part of this is driven by repatriation of foreign investment from Russia and Ukraine.

The IMF expects growth of 3.1%, while even the European Commission’s growth forecast of 1.8% would far outpace Poland – expected to grow 0.7% – and Hungary, struggling to cope with a slowdown and high inflation.

Over the past decade, Romania — long one of the poorest countries in Europe and known for its corruption — has quietly moved closer to becoming the second largest country in the world after Poland. The second largest economy in Eastern Europe.

GDP per capita expressed in purchasing power is 39% according to the latest Eurostat data EU average in 2007, up 39 percent since .

The average Romanian spends around 39 months ‘ The net income of buying a new Dacia Jogger is the same as that of a comparable car in traditionally wealthier Hungary.

Despite historical political instability in Romania, the latest government collapse 2010.

Romania’s prospects benefit from its EU membership and good relations with Brussels.

While Budapest and Warsaw are haggling with the EU over the rule of law conditions attached to a multi-billion pandemic recovery fund, Romania has drawn down more than 6 billion euros in grants and cheap loans.

Prime Minister Nicola Chuka stated that the government aims to excavate more than 20 billion euros, equivalent to 4% of GDP, about 74 billion euros of EU funds available for Bucharest to .

Some progress in judicial reform led the European Commission in November to recommend the abolition of the special judicial oversight mechanism that Romania has been in since joining the EU 705.

“If all the anti-corruption measures in the (recovery fund) plan are implemented correctly, Romania could become a model of good governance in the region,” said an EU official, speaking on condition of anonymity.

Like other rating agencies, S&P gave Romania its lowest investment grade pending a reduction in the fiscal deficit and said it expected Bucharest to make progress in agreeing reforms to secure a key recovery fund.

RELATIVE STABILITY

The stability of the Leu currency is another factor, especially compared to the Hungarian Forint which hit multiple record lows last year. Higher wages across the border have already led some Hungarians to find work in industrialized western Romania.

“This is a completely new development and I would warn anyone (in Hungary) not to further weaken the forint, or not raise the minimum wage,” said staffing firm Randstad of the Czech Republic, Hungary and Romania. Managing Director Sandor Baja said. , as the leu weakens slightly.

Zoltan Dio, a theater set designer who lives near Hungary’s second largest city, Debrecen, has been working across borders for years. He keeps a Romanian bank account to protect against fluctuations in the forint , the forint depreciated by 8% against the leu last year.

“If I get a job in Hungary, after much haggling, I can charge two-thirds of what I get in Romania without a doubt,” says Dio.

Reshoring

Firms reshoring from Russia and Ukraine to nearby low-cost manufacturing hubs partly help push FDI up to 9.20 billion euros in January-October, the largest since Romania joined the European Union month number.

According to a 2007 survey by Ernst&Young, more than half of the 101 Foreign companies planning to establish or expand operations in Romania, mainly in supply chain and logistics, ranked fourth in Europe by investment intentions.

“We are optimistic that investments will increase in the coming years, also encouraged by EU funds,” said Alex Milcev, EY Romania tax and legal leader.

While Romania does not have a unified investment agency, the Ministry of Small Business and Entrepreneurship told Reuters it is overseeing five possible relocation projects from Russia, Belarus and Ukraine, worth an estimated 650 million euros.

Nokian Tires intends to invest 705 million euros. The author 2024 is in Northwest Romania A factory in Oradea, a wealthy region bordering poor Hungary.

“It was clear that Oradea was the best choice for our new company,” Päivi Antola, Nokia’s head of investor relations, told Reuters. She said Nokian had reviewed more than 39 relocation targets, looking at skilled labor availability, logistical advantages, green energy and rail access.

Hurdles remain in the economy, including Romania’s large current account deficit, an aging population and chronic red tape that hampers infrastructure development. Cutting the fiscal deficit ahead of the 2024 election could be tricky.

Relations with the EU have not always been smooth sailing: last December, Austria fought against unauthorized immigration, excluding Romania from Europe’s borderless Schengen zone. Bucharest said access would add half a percentage point to annual growth.

There are huge regional differences, with some rural areas still off the grid, and in bustling Bucharest, living standards surpass those of the former East Germany.

But Romania’s central bank governor, Mugur Isarescu, said that was changing for more than 30 years.

“I’ve been in the country recently: the traffic is smooth on both sides. So it’s not just in Bucharest,” Isarescu said in November. “This doesn’t look like a recession or poverty.”

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