Leonardo BADEA, PhD
“Beyond the obvious negative effects, the Covid-19 pandemic emphasized several op
We must take advantage of the possibility to develop a new industrial policy based on the understanding of modern technology, sustainability and social cohesion, as solutions to the climate change, the economic crisis, and post pandemic recovery.
A national strategy focused on the industrial policy must build upon the identification of specific local resources (material, but also human) and the governmental tools that would revitalize theinternal production capacities. The government may guide the industrial policy toward the industries identified as strategic and generating
The sectors will continue to represent an essential direction for the enforcement of the industrial strategy, but, at the same time, each region should be distinctively encouraged to identify its specific comparative advantages and subsequently be supported to valorize and develop them.
The state (through the central administration) is in a convenient position (having a general, ensemble view and the capacity to act) to make an important difference in the valorization of the national development potential by redirecting resources to sustain new activities at regional level, rather than trying to revitalize declining sectors. This is more likely to sustain long term growth. For instance, although there could be a justification for sustaining the growth of specific activities in the processing industry, the sector in its entirety has dropped as far as long term occupation is concerned. At the same time, the demand of skillshas modified at pace with the economic changes.
From this perspective, the industrial policy must not only be multisectoral
A bidirectional communication must be attained both from the government to the local administration and regional business sector, emphasizing the priorities and opportunities of the global environment (evolutions of the external trade, access to European and international financing, strategic investors’ interest, etc.), as well as the other way around, starting from the identification of local investment opportunities, local comparative advantages and efficient and competitive ways to encourage business environment solutions. In this context, beside the existent state or European and international institutions financing
During the last trimesters, Romania has attained economic performances above expectations, considerably higher compared to its regional peers. This is the direct consequence of the surprising resilience of the industrial sector, as well as the strength of the constructions sector (owing to the specific conditions ensuring the compliance with the distancing requirements). The public supp
During the next few months it is expected that the economic recovery maintains a positive and alert pace, but given the decrease in the people’s interest for vaccinat
Should a new pandemic wave (with a probably reduced intensity) hit in the autumn (due to the cold weather) and the level of herd immunity not be reached by then, we might witness increased health risks for the population. Therefore, the elimination of all restrictions might be delayed, especially in certain fields of activity that are more exposed, and that may reduce the pace of the economic recovery.
That is why, despite the short term positive evolutions in the management of the pandemic and the economy, we should not stop nor reduce the efforts for long term development. Addressing the structural vulnerabilities is of utmost importance, because if not dealt with, their negative effects on the economic growth would become visible as soon as the turbulence of the pandemic intensity would settle.
Modern economies are very sensitive to consumers’ and investors’ sentiment and these variables have become increasingly volatile as an effect of the technological advancement and the high influence of the information flow on the immediate consumption, savings, and investment behavior. The economic optimism we witness is mostly influenced by the present accelerated growth induced by the post-pandemic recovery phase. However, this optimism
An important challenge we are facing at the moment is that the economic recovery is unequal not only as far as the activity sectors are concerned but also at regional level reflecting preexisting disparities. We risk that the pre-crisis development lags accentuate if actual measures targeting these vulnerabilitiesare not implemented.
Public investment projects might contribute to the economic development of areas that lag behind because there is potential to increase the added value if the local specificity is superiorly valorized.
The entrepreneurs will most definitely be interested to start and develop new businesses in these areas that would reduce the gaps if there is an opportunity generating impulse, as it could be for instance, the development of the infrastructure in these areas. In am not referring only to transports and communication but also to public health, access to education and lifelong learning, as well as electricity, water, pluming, and other public utilities,where the state is involved, directly or indirectly. Numerous studies show that the multiplying effect of public investment is particularly high during recessions or at the beginning of the recovery phase. At the same time, studies show a positive effect on new jobs creation as well. Therefore, the investments not only improve the living conditions, but also generate an economic impulse that will most definitely determine the private sector to follow up. This has been the case in several occasions, most recently proved by the decisive contribution of the private sector to the economic resilience and recovery that exceeded expectations.
The fiscal measures implemented during the COVID-19 crisis are a necessary and adequate support but the economists recognize that generally, loose fiscal policies favor consumption, at the expense of future capacities. It is therefore important that the state financial effort be as much as possible channeled toward investments and less toward immediate consumption, which in the case of Romania is often met with imported goods (as an effect of the structural vulnerabilities already mentioned and with negative implications for the external position).
Two important directions emphasized by the activity of the Romanian National Committee for Macroprudential Oversight should be followed by all institutions with a role in the economic development of the country and improving the existing vulnerabilities. These include supporting the agrifoodsector (http://
From the perspective of the development of agriculture and food industry, I highlight only two recommendations of the National Committee for Macroprudential Oversight, which may be implemented through legislative amendments:
•the revision of the certificates of deposit mechanism through close dialogue with the credit institutions and related associations;
•the amendment of the legislation regarding the certification and promotion of agrifood products through cooperation with the related associations and appropriate budgeting of these programs.
Regarding the need to support green financing, the recent report of the National Committee for Macroprudential Oversight reveals that the climate change agenda has high stakes for the Romanian economy and financial system, from the perspective of opportunities as well as costs, should the green transition be delayed.
It would be inappropriate for the political decision factors to only hope that the situation changes for the better by itself or exclusively by the actions of the market and the private initiative. This is why we must act decisively to reduce climatic risks and ensure a fast but smooth transition to a sustainable economy.
Moreover, a study published in May by the IMF showed that “green” public investments have a higher economic impact, including on the labor market(https://www.
Financing projects with low environmental impact that facilitate the transition to a low carbon emission economy is an important catalyst and the analysis groups of the National Committee for Macroprudential Oversight
It is the time of a national effort that should take the center stage of public concerns, in order to develop Romania through an adequate industrial policy, starting from the following requirements:
The crisis we hope to leave behind has shown once more that many evolutions within the economy and society are interconnected and mutually conditioned. Similarly, the development opportunities brought by the end of the pandemic are interrelated and connected to the existing vulnerabilities they should address. Romania’s industrial strategy cannot be but closely related to the acute priorities – reducing the vulnerabilities of the external commercial balance with agrifoodproducts, the need to transition to a sustainable, environmental friendly economy, the necessity to reduce regional development disparities to increase social cohesion. They are all interrelated and in fact this is one of the great opportunities of the moment,that is, to trigger a virtuous circle based on these interdependencies that still act against us”.
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