February 27 (SeeNews) - Romania's widening current account gap can hamper the country's economic growth, the European Commission said on Wednesday.
The current account deficit has been increasing and its composition raises concerns, as from a nearly balanced position in 2014, the deficit rose to 3.2% of GDP in 2017 and is forecast to deteriorate further, the EU's executive body said in its country report on Romania 2019, part of the European Semester Winter Package.
"Imports of consumer goods have increased much faster than those of capital and intermediate goods. This means that the deterioration in the current account is driven more by consumption than investment, which will not support long-term economic growth," the Commission said.
Romania's current account was in deficit of 9.416 billion euro ($10.65 billion) in 2018, compared to a gap of 5.970 billion euro in the prior year.
Romania has made limited progress in addressing the 2018 country-specific recommendations regarding tax compliance and collection, public procurement, social dialogue improvement, access to quality education, quality of healthcare system, public investment project preparation and prioritisation.
No progress has been made on improving fiscal policy, establishing a minimum wage according to market's needs, setting a minimum inclusion income, streamlining decision-making processes or on strengthening corporate governance of state-owned enterprises.
Regarding progress towards its national targets under the Europe 2020 strategy, the Commission noted that Romania is performing well on employment rates, national greenhouse gas emissions, renewable energy, energy efficiency and tertiary education. R&D investment and early school leaving remain some distance away from their respective targets.
The main findings of the Commission's in-depth review in the report are that rising labour costs may hurt Romania’s ability to compete internationally, environment and investment decisions are being hurt by unpredictable policy making, and insufficient capacity of the public administration limits development opportunities.
($=0.8796 euro)