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Croitoru, BNR: We are a small country and depend on foreign capital

Since we depend on foreign capital flows, economic growth in Romania will also depend on the evolution of other economies and the policies adopted by other states, says Lucian Croitoru, the councilor of the BNR governor.

Croitoru explains that Romania will have only a 'crawling' economic growth if foreign capital flows do not start coming into the country.'It was foreign capital which gave economic growth in 2005-2008. As long as capital incomes do not start coming in again, inflation will remain the main challenge. 'In Romania economic growth depends a lot on what is happening outside Romania. We are a small country and depend on what is happening there and also on decisions concerning foreign investments.'

Economic debate has been oriented lately towards changing the model of economic growth for Romania, from growth based on consumption to one based on exports or even better on investments. However the contribution of net exports to GDP is low.The contribution of capital flows to the increase of GDP will be 2.9% until 2015, IMF considers, 1% lower than estimates made by Romanian authorities.

Croitoru considers there will not be economic growth without consumption, but points out that there is a problem when the current account deficit becomes unsustainable.As for the economic policies of states, Croitoru showed that 'If you have 1,2,3 objecxtives then you must have at least 1,2,3 instruments and you might not have them.' He mentioned the USA in the years 1929-1933 when there were no instruments to counteract economic contraction of over 25% in that period.

'Immediately after 1990 Romania suffered a shock coming from the fall of a system and lacked instruments. Economic fall was of 25% in three years, similar to the one in the US during the depression. Then we had recessions 4-5 times in the years to come but they were smaller. Why? Because we had instruments from IMF and WB,' Croitoru added.

Romania concluded an accord with IMF and EU in 2009 when the economy had reached recession. Analysts estimate that the recession of 2009 and 2010 led to a 10% economic contraction.

Sursa: http://www.actmedia.eu

Tags: economic capital croitoru growth romania foreign depend country bnr

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