November 21 (SeeNews) - Romania has to speed up the planned changes outlined in the Recovery and Resilience Plan (RRP), simplify its tax system, and enhance environmental sustainability in the energy sector, the European Bank for Reconstruction and Development (EBRD) said on Tuesday.
The government should enhance its ability to carry out the Recovery and Resilience Plan (RRP) by allocating resources and organising institutions more effectively, the EBRD said in its Transition Report 2023-2024.
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Local authorities should also create a more efficient, inclusive, and straightforward tax system to increase revenues and reduce the fiscal deficit.
Also, Romania has to work on integrating renewable energy into the grid and developing a regulatory framework for offshore wind energy.
The EBRD expects Romania's gross domestic product (GDP) to grow by 1.8% in 2023, following a 4.7% growth rate in 2022.
The bank also highlighted the positive impact that the local hydropower company Hidroelectrica's initial public offering (IPO) had on the local stock market. The IPO increased the market's liquidity and regional appeal, and it served as a model for the listing of other state-owned businesses.
"The economy performed strongly in 2022, expanding by 4.7%, despite significant external headwinds, and driven by robust domestic demand and accumulating inventories. In the first half of 2023, growth decelerated to 1.7% year on year, with a notable slowdown in the second quarter. Domestic demand remained resilient amid higher government spending and investment, but falling inventories and an annual decline of goods exports dragged on growth. Industrial production has failed to return to growth so far, reflecting the considerable supply-side shocks in 2022 and weaker foreign demand," said the EBRD.
Inflation is expected to average around 10.7% in 2023, compared with 13.8% in 2022.