In its 2013 Transition Report, the bank highlighted several core priorities for the Romanian economy, including the acceleration of the country’s anti-corruption and judicial reforms, as well as the removal of regulatory barriers to the restructuring or write-off of NPLs, which represent over 20% of the total loans.
Additionally, the international lender warned that Romania’s decision to delay state subsidies in the green energy sector could adversely affect further investments in renewable energy.
Romanian producers of renewable energy benefit from government support via a green certificates scheme, which allows them to recover part of the production costs. However, the government decided earlier this year to temporarily reduce the number of certificates granted under the scheme, triggering wide protests from investors, who threatened to limit investments or abandon their projects altogether.
“Certain features remain unclear regarding the non-retroactive character of the provisions of the government ordinance, and there is uncertainty about the transparency and predictability of the business environment in which future renewable energy projects are expected to be implemented,” EBRD said.
Romania has made some progress in judicial reform and fighting corruption, but further steps are needed, particularly regarding the prevention and sanctioning of corruption relating to public procurement, the report noted.
Additionally, the country’s program to privatize and restructure state-owned enterprises “has advanced haltingly,” with some positive results in the gas and electricity sector, including a successful 10% initial public offering of Nuclearelectrica in September 2013, and a 15% IPO of the natural gas producer, Romgaz, in October 2013.
However, the privatization of freight rail company CFR Marfa has failed and efforts to sell the postal company, Posta Romana, and the large chemical company, Oltchim, have been unsuccessful thus far, EBRD said.
Nonetheless, Romania’s fiscal performance over the past year has been “impressive”, considering that 2012 was an election year, the report noted.
The European lender said Romania remains highly exposed to weaknesses in the euro area, but medium-term growth prospects for the local economy continue to be favorable.
“A more efficient use of EU structural funds would help improve growth prospects,” it said.
In November, EBRD revised slightly its forecast on Romania’s economic growth to 2.4% in 2014, from 2.2% previously, but warned of continued growth constraints from external factors, particularly from eurozone economies. For 2013, the EBRD estimates a growth of 2.2% in Romania, up from 1.4% envisaged earlier in the year.