Publication: Romania - Systematic Country Diagnostic Update
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2023
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2023-08-14
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This report is an update to the first comprehensive Romania Systematic Country Diagnostic (SCD), published in 2018, which identified a set of development priorities for Romania to achieve the twin goals of poverty reduction and shared prosperity. While the earlier diagnostic remains largely valid, several emerging themes have become prominent in recent years, bringing both challenges and opportunities for the country to reach the development goals in the medium and long term. These include impacts from the COVID‐19 pandemic and Russia’s invasion of Ukraine on Romania’s economy and people, a drive toward the digital and green transformations, and access to sizable EU funds. Alongside these trends, challenges around demography, institutions, and governance continue to play a crucial role on Romania’s development agenda. This report validates the relevance of priorities identified in the SCD 2018, revises the priorities and high‐level outcomes based on new evidence, and provides the analytical underpinnings for the next Country Partnership Framework. Romania continues its economic progress of growth and income convergence, yet the ‘tale of two Romania’s’ persists. The SCD 2018 summarized the overarching narrative of the country’s socio‐economic development as a tale of two Romania’s: one urban, dynamic, and integrated with the EU; the other rural, poor, and isolated. Five years on, the country has made some progress in addressing constraints to growth as well as in reducing poverty and inequality, despite several unprecedented shocks, such as the COVID‐ 19 pandemic, and Russia’s invasion of Ukraine. Romania’s growth rate remains among the highest in the EU, boosting convergence in living standards with the average Europeans. However, Romania’s poverty rate is still the highest in the EU. Inequality also remains relatively high compared with other EU countries, with sizeable disparities across Romania’s regions. This SCD identifies six High‐Level Outcomes (HLOs) to expedite Romania’s achievement of the twin goals, reduced poverty and shared prosperity. The HLOs, if achieved over the next five to ten years, would mark an improvement in the wellbeing of the population, and especially the poorest and most vulnerable. These are (i) predictable institutional and economic environment for people and businesses; (ii) equal access to high‐quality public services at central and local government; (iii) better health and education outcomes for all; (iv) favorable conditions for more and better private sector jobs; (v) climate change mitigation for environmental sustainability of economic activity; and (vi) resilience to shocks and adaptation to climate change, especially for vulnerable households. While many HLOs are connected, HLO‐1, Predictable political and economic environment for people and businesses, is the most cross‐ cutting. This reiterates the key lesson from the SCD 2018: despite impressive economic growth, achieving shared prosperity and sustainable welfare improvements will remain a distant reality if Romania does not address its governance challenges.
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“World Bank. 2023. Romania - Systematic Country Diagnostic Update. © World Bank. http://hdl.handle.net/10986/40192 License: CC BY-NC 3.0 IGO.”
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