RIO Country Report Romania 2017

Romania maintained a relatively stable macroeconomic situation, low inflation and external deficits despite the political instability. The real GDP growth accelerated in 2017, expanding by 5.8% in the first half of the year, driven by private consumption, tax
cuts, increase of the wages in both public and private sectors and low rates of inflation. Public investment contracted due to a slow uptake of new projects financed by EU funds under the 2014-2020 programming period. The high share of employment in agriculture, the industry dominated by traditional manufacturing sectors and low investments in modern equipment are factors undermining productivity growth. In 2016, the Romanian expenditure on R&D (GERD) was 0.48% of GDP compared to 0.49% in 2015 and 0.38% of GDP in 2014, the lowest value in the past years. Romania is a modest innovator. Competitiveness is affected by a weak R&I capacity coupled with a low demand for R&I due to the structure of the economy and the reluctance of firms to engage in these activities. The R&D investment in the business sector (BERD) increased from 0.16 in 2014 to 0.27% of GDP in 2016, yet remains significantly lower than the EU28 average (1.30% of GDP). The main innovation challenges in Romania are:

• Increase public R&I expenditure: The R&I system is chronically underfunded.
• Significant brain drain generating lack of skilled human resources: Romania has one of the highest share of researchers working abroad (World Bank, 2014).
• Improve the governance of the R&I system at national, regional and institutional level. Ensure predictability and stability: The R&I governance is characterised by excessive and burdensome bureaucracy, predisposition to over-regulation, frequent legislative and institutional changes, lack of human resources.
• Enhance the efficiency of public expenditure in R&I and education: The limited funds for R&I are dissipated across a large R&I system which lacks funding schemes rigorously based on the results of the regular evaluation of the research and education performance.
• Improve the framework for private RDI investment and the collaboration with the public sector: The level of R&I funds invested by businesses is very low: 0.18% of GDP in 2015 (EU28 average in 2013: 1.12%). The highest proportion of these funds is spent on R&I performed by the business sector and a very small share (0.03% of GDP) is provided to the public sector.