1. As a macro-economist, you are able to see pros and cons of the record growth that is being registered in Romania in 2016 (in terms of dynamics). Can you summarize them?
Indeed, Romania is likely to post this year a remarkable growth rate, most likely close to 5%. This comes in the context of the pro-cyclical fiscal stimulus which has been provided in 2015 and 2016. As a consequence, this has led to a consumption driven growth mirrored by the high wage growth rates and an acceleration of retail sales. The problem is that without a boost of the potential output due to lagging public investments, the growth acceleration is likely to lose steam and be increasingly reflected in external deficits. Therefore, already as of 2017 we should expect an economic slowdown.
2. As a keen observer of the financial markets, have you expected the unexpected in terms of Brexit?
If you refer to the unexpected results of the referendum, I have never pretended to know for sure that there will be no Brexit whatsoever. Therefore, I have never been part of the majority who ended up being totally surprised. If you refer to what some consider to be a rather mild economic reaction to the Brexit, I consider that it’s far too soon to talk about this. At the end of the day, the economic impact of the Brexit, be it positive or negative, will require at least 1-2 years to be found in the economic statistics. It has nothing to do with the initial emotional reaction of the markets or with the short-term consumer sentiment. For the time being, we see a much weaker GBP supporting to some extent the British businesses, but to the same extent making the British poorer and rising the inflationary pressures. I suspect that this is not what the Brexit voters wished for…
3. You are one of the founders of AAI, The Romanian Independent Directors Association, and one of your goals is to raise the professional standards of members of boards of directors, in order to trigger the development of Romanian companies and increase their value. To what extent have you reached your goals in 2016? From this position, do you think that Romanian companies have rather increased their values in 2016 or have their turnover growths been below their potential?
We have to be aware that the macro economic success of Romania relies heavily on how successful Romanian companies are at the microeconomic level. Companies these days have to perform in a very complicated and unpredictable environment. This requires a highly competent and sophisticated corporate governance which not so many Romanian companies have used so far. Confronted with the scarcity of the domestic capital, Romanian companies have no other choice but to compensate for this by having a state-of-the-art corporate governance which would help them utilize, in the most efficient way, the available resources for maximum results. In terms of size and regional foot print, Romanian companies are behind their Hungarian and Polish peers and I believe that the quality of the corporate governance is one of the main reasons.