The national economy at a crossroads in the new global order

At a time when a new technological revolution is taking place at a global level, profoundly rewriting the rules of the economic game, and when supply chains are being reconfigured amid aggressive protectionist trade measures introduced by the US, it is essential that the European business environment, and especially that of our country, adapt to the new challenges in order to remain competitive and support economic development, stated yesterday the participants at the third edition of the Economic Trends conference, organized in partnership by the National Bank of Romania and the European Businesswomen's Federation (PEFA).

At the opening of the event held at the BNR Arena, Cosmin Marinescu, Deputy Governor of the National Bank of Romania, reviewed the risks and challenges facing the national economy, from inflation and budget deficit to market volatility and the impact of protectionist measures on global trade.

Cosmin Marinescu stated: "As for the macroeconomic reality, we all feel that we are going through a period full of challenges, but also opportunities. After overlapping crises at a global and regional level - pandemic, inflation, war, energy crisis - I believe that we have entered a stage of controlled adjustments, although not in their entirety. We can observe, for example, a global trend of inflation correction, and Romania is no exception. The forecasts of the National Bank of Romania indicate a decrease in the inflation rate to 3.8% at the end of 2025, but also a high number of uncertainty factors, which tilt the balance of current risks upwards. In 2024, economic growth was below expectations, at only 0.9%. At the same time, the budget deficit exceeded 8.6% of GDP and remains one of the most pressing economic problems or even the biggest economic policy challenge of Romania. In tandem, the current account deficit widened by almost 2 percentage points of GDP, which indicates public policies that are at odds with the criteria of macroeconomic sustainability. The good news, including for us at the National Bank, is that we are no longer at the point where we are just discussing the imperative of reforms, because the first steps were already taken at the beginning of this year. The recently adopted fiscal-budgetary measures and the announced administrative reform priorities, in order to streamline budget expenditures, express the commitment of decision-makers to restore the sustainability of public finances and economic balances".

• Last place in the EU in innovation

Regarding the business environment, the deputy governor of the central bank stated that, unfortunately, companies in our country are too little innovative and, for this reason, do not bring added value and are not competitive at a global level.

Cosmin Marinescu showed: "According to the Innovation Scoreboard 2024, Romania falls into the class of modest innovators, unfortunately in last place among the European Union states. In this regard, on the one hand, digitalization offers immense opportunities, such as process automation, access to new markets, increased efficiency, and these advantages will translate into increased productivity and, thus, potential GDP. On the other hand, challenges persist that the business environment cannot ignore: access to financing, legislative stability, volatility of external markets and the reported tariff shocks. According to recent studies, in 2024 the number of insolvencies in the economy increased, especially in construction and the manufacturing industry. Therefore, it is obvious that those companies that know how to manage risks will be able to cope with the increased difficulties. We have positive examples in this regard - Romanian entrepreneurs who innovate, Romanian companies that create sustainable business models or that expand their businesses across borders".

He also showed that the macroeconomic picture remains dominated, this year as well, by multiple risks and uncertainties, both internal and external, which urges both prudence in terms of public policies and sustained efforts to benefit from development opportunities, such as those offered by European funds.

"From the perspective of the NBR, one of the developments that is closely monitored, given its significant influence on economic forecasts and monetary policy conduct, is the attraction and use of European funds, fully and on time. European funds are, in the current context, the decisive source of financing for major investments in the economy. At the moment, any additional delay will mitigate the anticipated positive impact, which is why we need a sustained national effort in absorbing European funds", said Cosmin Marinescu.

• PEFA to launch Women's Entrepreneurship Index

Andreea Negru, President of the European Federation of Businesswomen (PEFA) stated that we are in a moment of rethinking the economic order, in which globalization has already begun to change, and the multipolarization of the world is taking shape.

"The trends that the economy is currently navigating must be analyzed without value judgments, as much as possible. And we are talking about the redefinition of world trade, where taxes and customs tariffs force the major economic powers to define their own development areas. Every day, we hear about the increase in defense spending and we understand that in order to have peace we must prepare for war. Moreover, we are talking about the evolution of artificial intelligence", specified Andreea Negru.

She announced that PEFA will launch for the first time on May 20, at Victoria Palace, in collaboration with the Department for Sustainable Development, the Women's Entrepreneurship Index, an indicator that will show the impact that female entrepreneurship currently has on the world economy.

• Instant payments - a beneficial system for companies across the Prut River

Anca Dragu, governor of the National Bank of Moldova, recalled that on March 6, the Republic of Moldova received the approval to become part of the SEPA area, the euro payments area.

Anca Dragu mentioned: "For the Republic of Moldova, our priority is to continue successfully on the European path. And I have to tell you something extraordinary. On March 6 this year, the Republic of Moldova received the approval to become part of the SEPA area, the euro payments area. (...) We obtained this approval and soon the citizens and companies of the Republic of Moldova will enjoy safe, cheap payments in euros to the European Union. We made an estimate and we will have a saving of at least 12 million euros in the first year of belonging to the SEPA area."

Also to facilitate the conduct of business in the Republic of Moldova, Anca Dragu stated that the NBM launched, in March 2024, the instant payment system, a system called MIA and which "is a great success".

"Currently, after one year of operation of this instant payment system, we have over 500,000 users. And I can tell you that one in three account holders uses MIA for instant payments. Why? Because they are very fast. In a maximum of 15 seconds, money is transferred from one account to another, with extremely low commissions, starting from zero commission and reaching up to 10,000 Moldovan lei per transaction", stated Anca Dragu.

According to the NBM governor, over 65-70% of the Republic of Moldova's trade is oriented towards the European Union, and 30% towards Romania.

• National defense industry - one of the engines of economic development

The national defense industry can be one of the engines of development in economic trends for the year 2025, said former Minister of Economy, Ştefan Radu Oprea, current head of the Prime Minister's Chancellery.

Radu Oprea stated: "We have a new strategy for the national defense industry, the first approved by a government in the last 35 years. We have never managed to have an approved strategy. The Romanian Government has a new vision. It is a new law on industrial cooperation, which replaces the offset law which has not produced effects in the economy, unfortunately, because we see the state of the 22 companies with state capital and the over 90 companies with private capital in this field. The new law on industrial cooperation is already producing effects for any of those who wish to be part of the equipment program for the Romanian Army and the other ministries of force. We already know that, without industrial cooperation, without real production in Romania, it is not possible. The year 2025, for the Romanian economy, can present many opportunities and if together we know how to make them functional, Romania will have a very great future among the member states, as one of the states with the greatest investment potential".

The head of the Prime Minister's Chancellery stated that in the current global conditions, "in which in ten minutes we see on TV a new "9/11" of world politics", it is very difficult to talk about predictability and said that companies should prepare to withstand such shocks, especially since we are in an area of economic risk due to high interest rates. Radu Oprea reiterated that the Romanian economy needs the amounts allocated through European Funds and it is necessary to absorb as much of the respective allocations as possible to complete the projects and investments started. He did not declare himself scared by the budget deficit, claiming that 58% of it represents investments made from the state budget.

Although they have started to invest in new technologies, small and medium-sized enterprises (SMEs) have problems in the professional training of employees, said Florin Jianu, PSD senator, former president of the National Council of SMEs.

Florin Jianu said: "From the perspective of SMEs, we have observed a greater need, a desire and even a reality in terms of investments in new technologies. We have seen a rapid growth in approximately 50% of SMEs invest in technology, which means innovation. At the same time, however, paradoxically, we have not seen this increase in what it means to invest in human resources. Only two out of ten SMEs invest in human resources, in a limited training from one to five days in what it means to human resources. Whether resources are limited, or innovation is expensive, we see it quite difficult to implement within small and medium-sized enterprises. It seems that the problem is the financing of innovation, which is between 1% and 5% of a company's revenues. That is why eight out of ten SMEs in our country invest their own resources, although we should also look at European funds."

He specified that Romanian entrepreneurs expect innovation resources to bring results in a year at most, which is very difficult in reality.

"I have seen research and development projects that last between three and five years and another three to five years to wait for the results of research and innovation. This is where we start in this economic reality", declared Florin Jianu.

The senator mentioned that he will propose two legislative initiatives to the parliamentarians: the first aims to support young people between the ages of 16 and 18 to create SRL-Ex (Limited Liability Company - in Exercise), which would be limited in time and would allow them to put their entrepreneurial skills into practice; the second aims to simplify legislation and debureaucratize under the principle that any new law approved by Parliament will repeal two older laws in force.

• Impact of 0.8% of GDP on the national economy, following the trade war triggered by Donald Trump

Alexandru Petrescu, president of the Financial Supervisory Authority, stated that in the current geopolitical conditions, in which "the improbable becomes probable", the authorities and the business environment must see what they can do together so that we can continue to have a strong economy.

"We are talking about unfortunate geopolitical circumstances, which can be combated by aligning with economic and military alliances. We are talking about the budget deficit, which can be reduced through better collection and by attracting foreign investments. We are talking about the trade deficit, which can be reduced through good investments, which can be achieved by absorbing European funds. And, in addition to these, we need the generalization of corporate governance and transparency", said the ASF president.

The ASF vice-president, Dan Armeanu, stated that the trade war launched by US President Donald Trump will have an impact of 0.7-0.8% of GDP in our country, and that the increase in defense spending will add at least 2 percentage points to the budget deficit, to which interest expenses will also be added. Therefore, Mr. Armeanu states that the reduction in the budget deficit provided for in the plan agreed by the Government with the European Commission will be offset by the above expenses, which will represent 3.5% of the Gross Domestic Product.

"To this deficit, in the next 5 years, there will be a very high pressure on the public budget, because the generation of "decrees" will reach retirement age, and the impact of retirement on the state social security budget will be very high", said Dan Armeanu.

• Trade deficit of 7.2 billion euros with China

For her part, Sterică Fudulea, president of the Economic and Social Council, presented a real X-ray of the Romanian economy. Sterică Fudulea said: "I see that sovereignism is fashionable now. Well, what kind of sovereignists are those who do their shopping in China through the Temu, Shein and Ali-Baba platforms, increasing the trade deficit annually? If in 2013 the trade balance deficit was 5.5 billion euros, in 2024, the trade deficit in 11 months had exceeded 30 billion euros, so an increase of 550% compared to 2013, an increase that is visible in everyone's pockets. What kind of sovereignty are we talking about, if the trade deficit with China was 7.2 billion euros at the end of 2024, 80% more than the 4 billion euros recorded in 2020? Let's also remember the war with Ukraine. We had no support for the business environment in Galaţi, Brăila and Tulcea counties, which were severely affected by that war and which fully bore the economic shock. We did not see any government program in this sense. I affirm that IMM Invest with a 25% grant is better than the one with a 50% grant on investments. And to reduce the trade deficit and attract foreign investments we need ARICE (ed. - Romanian Agency for Investment and Foreign Trade), but unfortunately that public institution only has 30% of the staff it should have. Moreover, the prevention law, which should show respect and guidance for economic agents, has seen over 80 legislative initiatives in its wake (I think there are now over 500 initiatives waiting through Parliament or other public institutions), which changed its initial content".

In these conditions, Andreia Surcel, member of the Directorate of the Romanian Counterguarantee Fund, stated that there is a need to rethink the financial support granted to SMEs.

Andreia Surcel said: "The state aid schemes were very good because they helped SMEs become resilient, but unfortunately we are talking about a stage of subsistence, because most of the public or European funds were allocated for working capital and less for investments in business development and re-technological upgrading, in order to have a competitive economy. Therefore, at the moment we have approximately 155,000 companies in difficulty at the national level. The state does not have much money left to throw into the economy and therefore there must be other sources of financing for the schemes regarding SMEs. There is the Romanian Counter-Guarantee Fund, there is the FNGCIMM, the state banks, soon we will have the Investment and Development Bank, institutions that can be used to build new financing and guarantee instruments for companies in our country".

• Pillar tax, a new problem for the business environment

The project regarding the tax on special constructions (the so-called pillar tax), as launched in decisional transparency, assumes that this tax will become permanent, which would mean a permanent penalty for investment projects, said Daniel Apostol, general director of the Energy Employers' Federation (FPE). "Romania needs economic development, and this can only be achieved with major investments. The state must encourage the realization of investments. But the special construction tax is a tax on investments, it is a fiscal burden that will significantly discourage investments in strategic sectors of national interest, reduce jobs and bring uncertainties regarding the final prices borne directly by consumers. This tax will significantly affect taxpayers who have invested a lot and in the long term (given that the tax is directly proportional to the value of the investments made). We understand the need for the state to make efforts to reduce the budget deficit at alarming rates, we request and have requested the time limitation of the application of the special construction tax. As the project launched in transparency is, it assumes that this tax becomes permanent. Which would mean a permanent penalty for investment projects", Daniel Apostol specified.

He mentioned that the Ministry of Finance took into account some of the FPE observations and accepted that this tax be calculated at the net book value of the constructions, which would reduce the fiscal burden that the state wants to impose. However, preliminary independent calculations show that the tax on special constructions is not an efficient fiscal measure and does not address the structural problems of the budget as this tax has a marginal effect on state revenues, but a significant negative impact on the economy and may discourage investments, thus affecting Romania's economic competitiveness, the FPE representative concluded.