Economic assessment of Romania 2002

Summary: The 1998 OECD Economic Survey of Romania demonstrated that the gradualist approach of the early years of transition was ill-designed and precious time was lost. Romania cannot really afford to continue without a comprehensive approach to reform. Credibility, which is only slowly improving, could be badly affected. The current window of opportunity is narrow, as the government is already in the middle of its political cycle. While the macroeconomic framework has improved, it is difficult to make rapid progress in all areas. In this regard, a comprehensive approach to policies can help to go forward with the most relevant reforms. This Assessment focuses on the key policy interdependencies that the government should keep in mind, notably in designing and implementing new legislation. Indeed, laws are important, but so is appropriate implementation. Romania has suffered for too long from over-involvement of the state in economic activity and it is now time to push for a more market-based adjustment of the economy. Notably, economic restructuring should be done as much as possible via transparent market mechanisms. This requires strong political commitment on the part of the government, whose determination will be crucial to improve the image of the country in the international community. Clarity in policy objectives and timely implementation are crucial. The stakes seem too high to forego the present opportunity, because slippage would severely compromise the chances of successfully pursuing the EU and NATO accession process, and further retard a sustained rise in the living standards of the Romanian people.