Romania’s economic growth in the period 2022-2024 would have been 1.2 percentage points lower without the National Recovery and Resilience Plan (PNRR), according to the National Bank of Romania (BNR)’s publication Study Notes no. 66 – European funds and public investments in Romania: implications of the conclusion of the PNRR on economic growth.
According to the authors, European funds, both those related to the PNRR and those from the standard multiannual financial framework, contributed to mitigating the adverse effects of the COVID-19 pandemic and facilitated economic recovery.
“The empirical analysis indicates that a 1 percentage point increase in GDP of structural and cohesion funds is associated, on average, with a contemporary impact of approximately 0.5 percentage points on GDP growth, to which are added subsequent drag-on effects. At the same time, the results highlight the essential role of the institutional framework: in economies with weak institutions, the impact of European funds is limited, while improving institutional quality significantly amplifies the effects on economic growth, in line with the specialized literature. Regarding the NRRP, by constructing a counterfactual series of GDP in the case of Romania, it was found that in its absence – namely the 1.6% of GDP spent -, economic growth in the period 2022-2024 would have been lower by up to 1.2 percentage points,” claim the authors of the study, according to Agerpres.
They point out that the public health crisis has amplified existing economic vulnerabilities, both nationally and globally, generating significant socio-economic effects and highlighting the need to strengthen the capacity to respond to future shocks. In this context, the European Commission launched the Next Generation EU programme, with the Recovery and Resilience Mechanism as its central pillar, on the basis of which the National Recovery and Resilience Plans (NRRPs) were designed.
“The implementation of the NRRP, however, was affected by delays, due to the overlap of major adverse shocks – including widespread price increases generated by disruptions in global supply chains and the war in Ukraine – as well as limitations in the administrative capacity to implement these programs. In the case of Romania, these difficulties were reflected in a slow pace of investments and reforms, which led to delays in the transmission of payment requests and, subsequently, to the renegotiation of the NRRP. In addition, given the conclusion of this program in August 2026, the revision also involved a reduction in the loan component, by approximately 2 percent of GDP. However, in terms of funds actually spent, Romania was slightly above the level of other economies in the region, such as Poland, Hungary or the Czech Republic, at the end of 2024,” the study shows.
The paper also analyses the macroeconomic prospects associated with the conclusion of the PNRR after 2026. On the one hand, in line with the experience of previous MFFs (Multiannual Financial Framework), there is a risk of an adverse impact on economic growth, by compressing total investments, given that the private sector has a relatively low capacity for compensation, and the fiscal space of the public sector is, in turn, limited.
“However, the shock of the completion of the PNRR is expected to be partially mitigated by the overlap of several factors: the persistence of the effects of projects already implemented, the impact of the structural reforms included in the PNRR – aimed at increasing the resilience of the economy -, to which is added the start of alternative investment programs, such as SAFE. In the case of the latter, the set of estimated multipliers and the assumptions imposed a priori – in particular full absorption – imply a possible cumulative impact on economic growth, including knock-on effects, of 1.4-3.5 percentage points by 2030. However, given the uncertainties related to allocations, conditionality and the implementation calendar for Romania, the role of the SAFE program is treated with caution, as a potential compensating factor, but not as a basic assumption in the quantitative scenarios,” the study states.