Template-Type: ReDIF-Article 1.0

Author-Name: Katalin Kis
Author-Workplace-Name: Magyar Nemzeti Bank
Author-Email: kiska@mnb.hu 


Title: What Happened in the Neighbour? The Past Decade of Romania's Economic Convergence

Abstract: While further enhancing Hungary's convergence strategy, one should take a look at
the convergence process of other countries in the Central and Eastern European (CEE)
region, as well as the underlying reasons, the achievements, the issues encountered,
the structure of growth and the development of balance indicators. The economic
convergence in Romania is a good example of the benefits and drawbacks in this
process. In the decade prior to the coronavirus crisis, Romania exhibited one of the
most rapid convergence in the CEE region in terms of level of development. Starting
from 51.6 per cent in 2010, the country reached 69.4 per cent of the European Union's
level of development by 2019, coming close to Slovakia. In the years leading up to
the Covid-19 crisis, Romania was among the top performers in economic growth in
GDP terms. This growth was based on the significant expansion of disposable real
incomes, the dynamic rise in household consumption, growing investment due to
the stable investment climate and the government's housing market programme
as well as a major improvement in productivity, partly related to the ICT sector.
Nevertheless, improving productivity often conceals overheating, and after 2015,
wages increased more than productivity. In addition, the deterioration in the current
account deficit, together with the increasing deficit and government debt related to
the coronavirus crisis, all point towards a negative trend in balance developments.
The fact that Romania was able to converge in terms of GDP per capita as measured
at purchasing power parity was due to dynamic growth, a substantial population
decline and statistical effects.

Classification-JEL:  
Keywords:  
Pages: 127-137
Volume: 20
Issue: 3
Year: 2021
File-URL: https://en-hitelintezetiszemle.mnb.hu/letoltes/fer-20-3-a1-kis.pdf
File-Format: Application/pdf
Handle: RePEc:mnb:finrev:v:20:y:2021:i:3:p:127-137