From uneven growth to inclusive development : Romania’s path to shared prosperity - systematic country diagnostic

Romania’s transformation has been ‘a tale of two Romania’s’, one urban, dynamic, and integrated with the EU; the other rural, poor, and isolated. The reforms spurred by EU accession boosted productivity and integrated Romania into the EU economic space. GDP per capita rose from 30 percent of the EU average in 1995 to 59 percent in 2016. Today, more than 70 percent of the country’s exports go to the EU, and their technological complexity is increasing rapidly. Yet Romania remains the country in the EU with by far the largest share of poor people, with more than a quarter of the population living on less than $ 5.50 a day (2011 purchasing power parity). There are widening disparities in economic opportunity and poverty, across regions and between urban and rural areas. While Bucharest has exceeded the EU average income per capita, and many secondary cities are becoming hubs of prosperity and innovation, Romania remains one of the least urbanized countries in the EU. Access to public services remains constrained for many citizens, particularly in rural areas, and there is a large infrastructure gap. This is a drag on the international competitiveness of the more dynamic Romania; and it limits economic opportunities for the other Romania in lagging and rural areas. This Systematic Country Diagnostic (SCD) proposes many development priorities for Romania that will help enhance equity and shared prosperity. Four broad areas of priority are identified: (i) increase the effectiveness and efficiency of the state in public service delivery; (ii) catalyze private sector growth and competitiveness; (iii) ensure equal opportunities for all; and (iv) build resilience for sustainable growth. The governance priorities are considered as prerequisites, whereas the other three areas proposed are intended to be complementary and mutually supportive. The complete list of priorities is very long, as difficult challenges remain in many key areas. Priorities are identified based on their potential for reducing poverty, boosting shared prosperity, and advancing toward the goal. A table with a detailed list of priorities is presented in chapter six. These priorities will inform the World Bank Group’s engagement in Romania for the period 2019–2023.