National Bank official warns: Romanian economy shouldn’t overload engine as they do in Formula 1

Georgeta Gheorghe 24/04/2018 | 13:59

According to National Bank of Romania (BNR) advisor Lucian Croitoru, Romania’s economic growth is problematic, as it is too big for its potential. In illustrating the current situation of the Romanian economy, which has seen the biggest growth in the EU over several quarters, Croitoru used an analogy, warning that Romania’s economy should not be overloaded.

“In order to evolve from the penultimate spot, from the point of view of the standard of living, on a better spot, we should boost economic growth. You will ask whether it is big enough. Yes, it is too big and this is the problem. A country must grow in line with its potential. Do you know how many times can a Formula 1 engine be used? For a maximum of two races. It cannot run any further. When a country is growing its economy a lot over its potential, like Formula 1 cars do, it is overloading its engine,” Croitoru said.

According to Croitoru, the economy must grow at a sustainable rate, and if we how this much, the balance will be disturbed.

“The first condition is to grow sustainably. The unsustainable growth of salaries, in order to accelerate consumption and have a 7 percent growth, does not mean that we will cut from the gap that separates us from the developed countries. If we grow this much, the economy cannot remain stable, otherwise the balance will be disrupted. If there is an external imbalance, we see a current account that is damaged or it will reflect in an internal imbalance, a bigger inflation. After such a period when one pushes towards economic growth, both imbalances will coexist,” Croitoru said.

According to the BNR official, the average economic growth by 2016 stands at 1.22 percent.

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