A CHALLENGING YEAR AHEAD

At the end of a troubled year riddled with geostrategic tensions and increa singly volatile economic conditions worldwide, the prospects for 2023 look challenging across the board.

On this note, OECD’s November 2022 Economic Outlook lists a set of hurdles affecting potential growth. “Tighter monetary policy and higher real interest rates, persistently high energy prices, weak real household income growth and declining confidence are all expected to sap growth,” the report notes, emphasizing that the United States and Europe are slowing sharply, while the major Asian emerging-market economies are expected to account for nearly three-quarters of global GDP growth in 2023.

The report also warns that energy price hikes have taken “a heavy toll on the world economy, which will worsen if European gas storage runs short. This could force rationing in Europe, hurt countries worldwide as global gas prices are pushed higher.”

To make matters worse, inflationary pressures have become stronger, “largely due to the war in Ukraine, which has pushed up energy and food commodity prices.”  

That said, experts seem to agree that, try as it may, Romania is not going to be able to avoid the negative effects of the economic slowdown in its main markets. Thus, adequate preparation is key to cope with the difficult economic environment. Looking at the important issue of state budget planning for 2023, AmCham Romania emphasizes that this process should be based on fundamental principles. In an Op-Ed article, AmCham Romania Vice-President Cristian Sporiș points out that, in AmCham’s view, a sustainable budget planning should be guided by strategic principles and objectives, such as a change in the economic paradigm. This is seen as a major priority “in a context where a consumption led growth proves to be not only unhealthy, but also a vulnerability.” Another important aspect is represented by strategic investments in high value-added activities. According to the AmCham official, they “will have a multiplier effect in the economy at large are key for a sustainable growth as well as for addressing one of Romania’s chronic vulnerabilities – the trade deficit, that has reached record values.”

Also, along with an improved absorption of EU funds, Cristian Sporiș notes that fiscal-budgetary consolidation must remain a priority, given Romania’s poor performance in terms of tax revenue collection. In addition, “the fiscal policy and monetary policy should be correlated and work together for the joint objective of reducing inflation,” Sporiș added. 

Find more opinions and predictions about domestic and global economic and geopolitical trends in this issue of Business Arena. As always, we will continue to keep an eye on all the developments affecting the business community. 

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