The year 2022 should be the year of structural reforms but it will be, rather, the year of contrasts, with a deepening of economic imbalances, say Frames analysts. The outlook for the new year indicates a widening gap between prices and wages – which will lead to a decline in living standards, a growing discrepancy between the public and private spheres, between promises and reality, between the rich and the poor. We will have economic sectors in black but also many areas in which inflation, financial blockage and labor crisis will continue to cause new victims, Frames analysis shows.

If 2021 were to be the year of structural reforms in the administration, in state-owned companies, in the general budget environment but also in the pension sector, in health or in education, for various reasons, the timing of the reforms was postponed, the solution being to include most of them in PNRR, as an essential conditionality of obtaining European money.

The only “reform” with an impact was the complete liberalization of the energy market (gas and electricity), which unfortunately led to a significant increase in the problems in the economy.

“Market liberalization has been done with the eyes closed, without taking into account any of the warnings issued at international or local level, including by Frames, regarding the possibility of rising energy prices. The moment of liberalization could be postponed for another year or it could be better prepared, with stricter rules and mechanisms to temper the inflationary momentum, given how vulnerable the economy is especially in the context of the pandemic and how fragile the standard of living is,” shows the analysis.

Rising energy prices have caused a real shock to the economy, and the impact of inflation will be even stronger in 2022. According to Frames estimates, the surge in prices will affect both companies and the population, the strongest in the second quarter.

“The compensations offered by the Romanian state are like a calming medicine offered to a patient who has reached intensive care. It still hurts, but it doesn’t solve his problem. With the lifting of facilities, in Q2 2022, we expect an even stronger inflationary wave than in 2021. Without concrete measures on the production and distribution chains, the state will be condemned, in March, to extend the protection mechanisms… until prices energy will re-enter a predictable trajectory. In other words, we will take from investments, from health, from other sectors to cover the strong economic effects generated by the cost of energy prices,” says Adrian Negrescu, Frames manager.

According to the Frames analysis, even in these conditions, the real inflation generated by the increase in electricity and gas prices risks exceeding 10%. This is because, if the bills of the vulnerable population are compensated, the costs will be felt in the other goods and services areas.