Flavius Jakubowicz
Tax consultant Flavius Iacubovici, president of the Association of Financial and Banking Analysts of Romania (AAFBR), tried to cover this topic for Ziare.com.
However, the first thing he noted was that his analysis is exclusively theoretical and economic in nature, and does not reflect a political, geopolitical or institutional position. The specialist’s assessment is based solely on official publicly available statistical data and macroeconomic analysis commonly used in professional and academic practice. Therefore, as the tax consultant notes, the scenarios mentioned are hypothetical, indicative and do not represent forecasts or commitments.
Context and motivation
Thus, explains Flavius Iacubovici, the unification of Romania with the Republic of Moldova, in the sense of a full merger of states, with economic, fiscal and institutional integration, is a topic that goes beyond the emotional-historical sphere and must necessarily be analyzed through the prism of objective economic realities.
“From a purely economic point of view, such a hypothesis cannot be viewed simplistically. It is not enough to simply add up the GDP of two states, just as one cannot mechanically add up purchasing power, living standards or labor productivity to get a “new”, stronger economy. In reality, the integration of two economies with different levels of development generates friction, convergence costs and periods of adaptation, sometimes long,” explains the tax consultant.
Therefore, he continues, this analysis starts with real economic data and how they might interact in a hypothetical merger scenario.
Size of the economy and level of development
The specialist points out that, according to the IMF, Eurostat and the World Bank, Romania’s nominal GDP is currently about 380-400 billion euros, while Moldova’s economy is about 16-18 billion euros. In other words, he adds, Moldova’s economy is less than 5% of the size of the Romanian economy.
“The difference is even more noticeable if we analyze the GDP per capita. In Romania it is around 19,000-20,000 euros/person, while in Moldova it is around 6,000-6,500 euros/person, according to the same sources. In terms of purchasing power parity, Romania reaches about 77-78% of the European Union average, while the Republic of Moldova reaches about 30-35% of the EU average,” Flavius Iacubovici adds.
Thus, the tax consultant further explains that in the unification scenario, the total GDP of the new state will increase arithmetically, but the average GDP per capita will slightly decrease compared to the current level of Romania, at least in the short and medium term. However, he clarifies that this effect is well known in the economic literature and reflects differences in productivity and income rather than actual economic regression.
Economic structure and limits to complementarity
Continuing the analysis, Flavius Iacubovici explains that, at first glance, it can be argued that the “strength” of the unified economy will lie in agriculture. Especially if we add Moldova’s internationally recognized wine production to Romania’s agricultural potential. On the other hand, he notes, statistics confirm that agriculture takes a much larger share of Moldova’s economy, about 12-14% of GDP, compared to Romania, where it accounts for about 4-5% of GDP.
“This reality undoubtedly creates a basis for complementarity: consolidated exports of agricultural products, development of wine tourism, strengthening of regional identity in certain niches. However, from an economic point of view, a clear statement must be made: agriculture is not an engine of sustainable economic growth in the long term without industrialization, processing and value chains with high added value”, explains the president of AAFBR.
At the same time, he notes, a modern economy is based on competitive industry, value-added services, technology and skilled human capital. This means that Moldova’s economic structure will require large-scale investments and deep reforms in order to get closer to the level of Romania, and not vice versa.
Labor market and demography: solution or constraint?
Continuing the analysis of this scenario, Flavius Iacubovici also notes that one of the recurring questions is whether such a union could solve the labor market problem in Romania.
“Official data show that both states are facing demographic decline, emigration and aging populations. Moldova, in its turn, is experiencing a labor shortage and has a significant diaspora,” the expert notes.
Therefore, he explains, a possible merger could temporarily alleviate certain tensions in the Romanian labor market, but would not solve the problem structurally, given that the labor shortage is essentially a problem of productivity, qualifications and economic attractiveness, and not just a question of the number of available people.
Convergence costs and budgetary pressures
Continuing with the modeling of the economic union of the two countries, Flavius Jakubowicz also notes that perhaps the most important economic aspect is the costs of convergence.
“The differences between the two economies will require significant investments in infrastructure, public administration, education, health care and wages. Analyses published in recent years in the economic press and academia agree that Romania, at least in the first years, will bear the bulk of these costs,” explains the tax consultant.
He notes that this will not necessarily be a failure, but it will mean additional pressure on the state budget, on the deficit and, indirectly, on fiscal policy. In addition, adds the specialist, without very strict fiscal management, there is a risk that the long-term benefits will be overshadowed by short- and medium-term difficulties.
Economic sustainability and comparison with Poland
In addition, Flavius Jakubowicz says another legitimate question is whether the combined economy of the two countries will be more resilient to global economic crises.
The honest economic answer, as he shows, is that size does not guarantee resilience, which depends on diversification, productivity, institutional stability and the quality of public policy.
“Even in a favorable scenario, Romania reunited with Moldova will not automatically reach the level of Poland, which benefits from a solid industrial base, stable foreign investment, and a convergence trajectory that began earlier. The union will not be an economic ‘shortcut’ but a long-term process,” the economist explains.
The role of institutional capital and expertise
Regarding the appointment of Romanian specialists to key positions in Moldova, Anca Dragu, head of the NBM, is an illustrative example. The AAFBR President continues that this demonstrates the possibility of transferring experience and best practices that can accelerate economic convergence.
However, he adds, specialists cannot replace structural reforms, and success will depend on the ability of institutions to consistently implement these reforms.
Conclusions
Flavius Iacubovici concludes by saying that from a strictly economic point of view, a possible union of Romania and the Republic of Moldova would represent a long-term strategic opportunity, but also a significant economic effort in the short and medium term. Thus, he continues, the benefits would not be immediate and would not result from a simple summation of macroeconomic indicators, but would depend on the ability to manage convergence, invest wisely and maintain fiscal discipline.
“From this perspective, economic unification would be a long, complex and costly process, but not impossible. Its success would not depend on the size of the economy, but on the quality of economic and institutional decisions made along the way. It would certainly be an economic marathon, not a sprint,” Flavius Jakubowicz concludes his analysis.
