Bloomberg: Rapid growth of salaries diminishes Romania’s competitiveness

The Government’s policies from Bucharest to hike in salaries in the public sector and the minimum salary increase also impacts the private sector, but when the efficiency doesn’t keep up with the salaries increase, Romania’s competitiveness is diminished, which is bad for the inflation and economic growth, says Lucian Croitoru, counselor of the governor of the National Bank of Romania (BNR), according to Bloomberg.

„It’s an illusion to believe that you can get out by force from the categories of countries with cheap labor force. The economic competitiveness of our country is eroded,” said Croitoru.

Romania’s government was criticized for having a short term economic approach. Although the economic growth exceeded 5 percent due to salary increase and other tax reductions, BNR and analysts warns that these measures will have an effect over the investments expenses, which will limit the next growth.

The National Council of SMEs says that almost a third of the firms that they represent reduced or even stopped their activities from October 2015, mainly due to the labor force costs, together with the lack of workers, bureaucracy, higher taxes and corruption. An example is the British firm Alison Hayes, one of the biggest textile producers, which in March closed its factory from Romania, due to the growth in labor force costs.

According to an annual ranking of the World Economic Forum, Romania was on the 62nd place in 2016 out of 128 countries on most competitive economies.