Romania faces mounting poverty rates in 2009, World Bank says

Poverty rates expected to increase by 1.7 percent

The poverty rate in Romania is expected to climb 1.7 from a year earlier up to 7.4%, according to the WB’s Country Strategy Partnership with Romania for 2009-13.

“The poverty level is estimated to escalate to 7,4% of the country’s total population, and the number of children at risk of falling into absolute poverty is expected to increase to 10.7% in 2009, from 7.8% in 2008”, said World Bank.

The report shows that although the largest share of the poor live in the rural areas, the poverty rates are expected to accelerate by 40% in the urban areas – compared to the rural areas (+30%). The urban self-employed – in other fields than agriculture - will also suffer a major impact of the economic crisis.

In 2008, only 5.7% of Romania’s population was living in poverty, after the economic growth rates in the prior years have lifted thousand of people out of poverty. In the same period, the number of Romanians living in absolute poverty had dropped from 2.1 million in 2007, to 1.2 million in 2008.

The most vulnerable groups are people living in the rural areas, where 75% of the poor live. Children, youth, the Roma, the urban self-employed, the rural poor and the unemployed face higher risks.

World Bank stressed that the current social protection scheme targeting poverty were not effective and social protection spending per capita in Romania were the lowest in European Union.

The amounts allocated to schemes targeting poverty are very low, when reporting them to Gross Domestic Product, or to the actual needs.

“The required budget to meet the financial assistance demand to battle chronic poverty and the financial aid offered by the government to unemployed people and to people at risk of falling into poverty will remain a difficult challenge, given the restricted room for fiscal maneuver”, the World Bank said.

Business environment still has room for improvement

The government of Romania has to further reduce bureaucracy related to the business environment and public sector, according to the World Bank’s CPS 2009-13.

“The Government has put in place a satisfactory regulatory framework, addressing bill collection issues, reduction of fiscal burden for taxpayers, as well as of tax-collection administrative taxes. Nevertheless, the Government has to further pursue measures to reduce bureaucracy for the business environment and improvement of the interaction between this sector and authorities”.

The executive has kept the flat income tax at 16%, but said the country needed a sustained reform of the tax system, as tax budget remains at low rates compared to other EU-members while public costs are high.

“The improvement of the business environment is on the Government’s agenda. The business climate is severely affected by the uncertainties stemming from the regulatory policies, excessive number of taxes, labor taxation, excessive and ineffective bureaucracy, as well as slow and unpredictable resolution of business disputes”, WB report shows.

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