Overview

Abstract

Reports that while Romania’s income per capita increased from 26 percent of the EU-28 average in 2000 to 64 percent in 2018, economic growth has remained uneven due to ineffective institutions, unfavorable demographics, and weak human capital. In this context, competitive markets and educated and skilled workers prove the drivers of future growth. Productivity dynamics at the firm level suggest product market policies can develop into something more competition friendly, while direct intervention of the state in the economy should remain informed by competitive neutrality. At the same time, raising the quality of human capital requires renewed attention to education policies and a country system able to provide the right skills for the changing needs of the Romanian economy. The post-2009 financial crisis period witnessed a widening productivity gulf between leading and lagging firms, both within and across countries, and human capital remains a key determinant of economic growth through its influence on labor productivity.

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