OECD Economic Surveys: Romania 2022
Over the last two decades, Romania has converged rapidly towards the OECD average income per capita. Its economy has also proved resilient: after a deep contraction in 2020 triggered by the coronavirus pandemic, activity has rebounded fast. However, short and medium term challenges remain. The recent surge in inflation and the new pandemic wave require prudent macroeconomic policies. Eventually, fiscal sustainability needs to improve to cope with ageing. Productivity levels remain well below the OECD average, calling for reducing competition barriers, raising human capital, enhancing the regulatory framework, and improving transport infrastructure. Romania should seize the opportunity provided by the NextGeneration EU plan to boost investments for the green and digital transitions. Poverty remains high and some groups have difficulties to join the labour market. Active labour market policies need to be reinforced and access to training is a pre-requisite for addressing skills shortages. Finally, pursuing convergence to the highest OECD standards requires improving the rule of law and fighting corruption.
SPECIAL FEATURES: STRENGTHENING THE BUSINESS ENVIRONMENT FOR PRODUCTIVITY CONVERGENCE; IMPROVING LABOUR MARKET CONDITIONS FOR STRONGER AND INCLUSIVE GROWTH
Improving labour market conditions for stronger and inclusive growth
A large share of Romania’s population is detached from the formal labour market and does not have the skills needed to adapt to the fast changing environment. This results in large income and regional inequalities, with some groups – low educated, women, youth, and Roma – remaining at risk of poverty and social exclusion, especially in rural areas. The COVID-19 crisis has aggravated barriers to the labour market integration of vulnerable individuals. At the same time, skill mismatch on the labour market undermines Romania’s capacity to grow and to adapt to technological progress. Improving matching to support the recovery and making it more inclusive requires a vast range of measures. First, barriers to participation should be addressed, especially for disadvantaged groups, through more effective active labour market policies. Second, youth unemployment should be tackled by addressing the high level of early school leaving and strengthening employers’ involvement in training. Finally, offering reskilling options to Romanian workers is urgently needed and requires developing adult education. Doing so will involve increasing financial incentives for workers to train and improving guidance services, especially for the low skilled and in small firms.
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