mugur isarescu : romania - post - crisis performance and current challenges speech by mr mugur isarescu, governor of the national bank of romania, at the amcham ceo forum, bucharest, 31 may 2019. * * * accompanying slides of the speech. ladies and gentlemen, i am honoured to address, this morning, such a distinguished audience. i have gladly accepted your kind invitation, for amcham romania has become, during the last 25 years, an important voice of the business community, speaking on behalf of many us - based, international and local companies that are doing business in romania, and promoting its members ’ best practices. 1. growth, convergence and sustainability i am aware that, when talking to business community representatives, more than to other categories of public, the topic of economic growth, with all its determinants, trends, uncertainties and tensions, is of great interest. indeed, romania ’ s post - crisis performance has been impressive : average annual growth rate of 4. 6 percent in the last five years. romania ’ s economy is constantly growing, yet some tensions surround the macroeconomic equilibria. the advance seen in recent years was primarily driven by consumption that benefited from a loose fiscal and income policy, coupled with a tight labour market profile, which additionally spurred wage growth. the pass - through of consumption to output was nevertheless limited by the weak competitiveness position of some local industries on the domestic market, so that high consumption rates were accompanied by strong imports. thus, in spite of high export growth rates, net external demand has not made a positive contribution to the gdp advance since 2013. instead, this caused a significant current account deficit widening. therefore, in order to preserve the gdp growth trend, economic policies should focus on its sustainability. in the quest for supporting potential growth and increasing the resilience of the economy, there is no substitute for a coherent mix of macroeconomic policies and structural reforms. a durable economic growth is extremely important also from the perspective of euro adoption, as it would lead to progress in convergence, which will put us on the right track for achieving the goal of joining the eurozone. in order to stay on course, economic growth and convergence must advance in line with economic fundamentals. otherwise, the gains, as spectacular as they might be, could be jeopardised by abrupt setbacks. at the end of the day, forcing convergence or postponing convergence is equally harmful. i had the honour to be one

raising capital has, for a long time, been seen as the major challenge facing smes. the absence of good corporate governance practices makes it difficult for them to access finance from banks or investors. 22. adoption of corporate governance framework by smes in india is indispensable for taking this sector to a higher growth trajectory. the lack of corporate governance is mainly due to lack of awareness about corporate governance practices and its impact on corporate bis central bankers ’ speeches performance. thus, there is a need to educate smes about the benefits of adopting sound corporate governance practices. there also is a need to implement sme ’ s corporate governance code. ( g ) local partnerships and clusters 23. the need to adjust to global competition and instances of prosperous economies being built upon localised groups of firms, have caused governments to turn to policies based on enterprise clusters ( a cluster is an agglomeration of firms in a related line of business with clusters, in some cases, being comprised principally of smes, such as in italy ’ s industrial districts ). cluster development policies have proliferated in both developed and developing economies. membership of clusters and networks can enhance the productivity, rate of innovation and competitive performance of firms. clusters and networks can allow small firms to combine advantages of small scale with various benefits of large scale. schemes and programmes encouraging clusters need to be promoted further. instead of distributing limited resources to all parts, it is better to apply them to areas which can optimize the returns and maximize the growth. ( h ) smes ’ access to finance 24. smes identify financing, especially medium to long - term finance, as their topmost obstacle to growth and investment. according to the ifc - mckinsey study, close to 45 to 55 percent of the formal smes ( 11 – 17 million ) in the emerging markets do not have access to formal institutional loans or overdrafts despite a need for one. the finance gap is far bigger when considering the micro and informal enterprises – 65 – 72 percent of all msmes ( 240 – 315 million ) in emerging markets lack access to credit. the proportional size of the finance gap varies widely across regions and is particularly daunting in asia and africa. closing the credit gap for formal smes will be less challenging than for informal smes. close to 70 – 76 percent of the formal smes ( 18 – 22 million ) in emerging markets already have a banking relationship via deposit / checking accounts, while only about 30