Economy of Romania

Daniela Herea
Business and
Tourism

Romaniahasadeveloping,upper-middleincomemarketeconomy,the17thlargest
intheEuropeanUnionbytotalnominalGDPandthe13thlargestbasedonpurchasing
powerparity.ThecollapseoftheCommunistregimein1989,reformsinthelate1990s
andearly2000sandits2007accessiontotheEuropeanUnionhaveledtoanimproved
economicoutlook.
RomaniahasexperiencedgrowthinforeigninvestmentwithacumulativeFDItotaling
morethan$170billionsince1989.
Upuntilthelate2000sfinancialcrisis,theRomanianeconomyhadbeenreferredtoasa
"Tiger"duetoitshighgrowthratesandrapiddevelopment.
Until2009,RomanianeconomicgrowthwasamongthefastestinEurope(officially8.4%
in2008andmorethanthreetimestheEUaverage).Thecountryisaregionalleaderin
multiplefields,suchasITandmotorvehicleproduction.Bucharest,thecapitalcity,isone
ofthelargestfinancialandindustrialcentresinEasternEurope.

Romania'sGDPdropduringthe1990s.

EU membership (2007)
On1January2007RomaniaenteredtheEU.This
ledtosomeimmediateinternationaltrade
liberalization,buttherewasnoshocktothe
economy.Thegovernmentisrunningannual
surplusesofabove2%.
TheaccessionofRomaniaandBulgariatothe
EuropeanUnionhasgiventheUnionaccessto
theBlackSea.

RomaniajoinedtheEuropeanUnionin
2007andsignedtheTreatyofLisbon.

Economic growth
GDPgrowthreached8.3%in2006accordingtothestatisticalofficeoftheRomania(the
year-to-yeargrowthamountedtounexpected9.8%inthe3rdquarterof2006andstayedhigh
at9.5%year-to-yearchangeinthe4thquarterof2006),and8.0%in2007.Tableshowing
selectedPPPGDPsandgrowth2007to2018estimations,asofApril2015
Year

GDP
inbillionsofUSDPPP

%GDPGrowth

2007

326.324

+6.317

2008

360.870

+7.349

2009

337.915

6.576

2010

339.312

1.149

2011

349.975

+2.158

2012

358.542

+0.689

2013

376.219

+3.5

2014

392.773

+2.4

2015(est.)

406.964

+3.5

2016(est.)

425.039

+5.4

2017(est.)

448.449

+6.5

2018(est.)

474.120

+7.4

Romania'sNominalGDPpercapitapercountyin2012.

Romania'sNetSalarypercountyin2012.

The neighbors
Countriestendtobenefitfromsharingborderswithdevelopedmarketsasthisfacilitates
tradeanddevelopment.BelowisatableofRomania'sneighboringcountries,theirGDPper
capita,andtradevaluesbetweenthepairs.In2010,aslittleas10.94pcofRomanianexports
wenttoitsneighbors;while14.06pcofimportscamefromthesefivecountries.For
comparison,Germanyaloneaccountedfor16.83pcofRomania'sexportsand15.91pcofits
imports.

Country

GDP
USDper
capita
(2013)

Hungary

13,480

Romania

9,499

Bulgaria

Exportsto
USbillions
(2010)

Percentage
oftotal
exports

Imports
from
USbillions
(2010)

Percentage
oftotal
imports

1.984

4.04

5.113

8.47

7,498

1.770

3.60

1.890

3.13

Serbia

6,353

0.473

0.96

0.536

0.89

Ukraine

3,900

0.711

1.45

0.725

1.20

Moldova

2,239

0.438

0.89

0.223

0.37

Onenewleubank-note

Currency
TheleuisthecurrencyofRomania.Itissubdividedinto100bani(singular:ban).On1
July2005,Romaniaunderwentacurrencyreform,switchingfromthepreviousleu(ROL)
toanewleu(RON).1RONisequalto10,000ROL.RomaniajoinedtheEuropeanUnion
on1January2007andinitiallyhopedtoadopttheeuroin2014, butwiththedeepeningof
theEurocrisisandwithitsownproblems,suchasalowworkforceproductivity,postponed
itsadoptionplansindefinitely.
The fulfillment of the Maastricht criteria
Romania,asamemberstateoftheEuropeanUnion,isrequiredtoadoptthecommon
Europeancurrency,theEuro.ForthisreasonRomaniamustfulfilthe7Maastrichtcriteria,
ofwhichitcurrentlymeets4.

Convergencecriteria
Excessivedeficitprocedure
Assessment
month

Country

HICP
inflationrate

Budget
deficitmto
GDP

Exchangerate

Debt-to-GDP
ratio

ERMII
member

Changein
rate

LongCompatibility
terminterest
oflegislation
rate

None open(asof31March
2012)
2012ECB
Report

Reference
values

Romania

2013ECB
Report

Reference
values

Romania

2014ECB
Report

Reference
values

Romania

Max. 3.1%
(asof31Mar Max. 3.0%
2012)
(Fiscalyear
2011)
4.6%

Open
5.2%
33.3%
None open(asof30Apr
2013)

Max. 2.7%
(asof30Apr Max. 3.0%
2013)
(Fiscalyear
2012)
4.1%

2.9%
37.8%
None open(asof30Apr
2014)

None
2.3%

No

-0.6%

Min. 2 years
Max. 15%
Max. 60% (asof30Apr (for2012)
2013)
(Fiscalyear
2012)

Open(ClosedinJune2013)

Max. 1.7%
(asof30Apr Max. 3.0%
2014)
(Fiscalyear
2013)
2.1%

Min. 2 years
Max. 5.80%
Yes
Max. 15%
Max. 60% (asof31Mar (for2011) (asof31Mar (asof31Mar
2012)
2012)
2012)
(Fiscalyear
2011)

No

-5.2%

Min. 2 years
Max. 15%
Max. 60% (asof30Apr (for2013)
2014)
(Fiscalyear
2013)

38.4%

No

0.9%

7.25%

No

Max. 5.5%
Yes
(asof30Apr (asof30Apr
2013)
2013)

6.36%

Unknown

Max. 6.2%
Yes
(asof30Apr (asof30Apr
2014)
2014)

5.26%

No

Romaniaisanoilproducer,butthecurrentlevelofproductionisnotenoughtomakethe
countryself-sufficient.AlthoughatonetimeitwasEurope'slargestproducerofoil,mostof
itsreserveswereusedandsquanderedduringtheNicolaeCeauescuperiod. Asaresult,it
istodayanetoilandgasimporter.
ThepipelinenetworkinRomaniaincluded2,427kmforcrudeoil,3,850kmforpetroleum
products,and3,508kmfornaturalgasin2006.Severalmajornewpipelinesareplanned,
especiallytheNabuccoPipelineforCaspianoilfields,thelongestoneintheworld.
RomaniacouldcashinfourbilliondollarsfromtheConstanta-Triestepipeline.
Romaniahasconsiderablenaturalresourcesforacountryofitssize,includingcoal,iron
ore,copper,chromium,uranium,antimony,mercury,gold,barite,borate,celestine,emery,
feldspar,limestone,magnesite,marble,perlite,pumice,pyrites,clay,arablelandand
hydropower.

Energy

Theenergysectorisdominatedbystate-ownedcompaniessuch
asTermoelectrica,HidroelectricaandNuclearelectrica.Fossilfuelsarethecountry's
primarysourceofenergy,followedbyhydroelectricpower.Duetodependencyonoil
andgasimportsfromRussia,thecountryhasplacedanincreasinglyheavyemphasis
onnuclearenergysincethe1980s.TheCernavodNuclearPowerPlantiscurrentlythe
onlyoneofitskindinRomania,althoughthereareplanstobuildasecondonein
Transylvania,possiblyafter2020.

TheIronGateIHydroPowerPlant,ajointventurebetweenRomaniaandSerbia.

Sectors of the economy

Agriculture
Agricultureemploysabout29%ofthe
population(oneofthehighestratesin
Europe),andcontributesabout8.1%of
GDP.TheBrganischaracterizedby
largewheatfarms.Dairyproducts,pork,
poultry,andappleproductionare
concentratedinthewesternregion.
Beefproductionislocatedincentral
Romania,whiletheproductionoffruits,
vegetables,andwinerangesfromcentral
tosouthernRomania.Romaniaisalarge
producerofmanyagriculturalproducts
andiscurrentlyexpandingitsforestry
andfisheryindustries.The
implementationofthereformsand
theUruguayRoundoftheGeneral
AgreementonTariffsandTrade(GATT)
haveresultedinreformsinthe
agriculturalsectoroftheeconomy.

 Fishing
Fishingisaneconomicmainstayinpartsofthe
EastofRomaniaandalongtheBlackSeacoast,
withimportantfishmarketsinplacessuch
asConstanta,GalatiandTulcea.Fishsuch
aseuropeananchovy,sprat,pontic
shad,mullet,goby,whiting,garfish,Black-Sea
Turbotorhorsemackerelarelandedatports
suchasConstanta.
Therehasbeenalargescaledecreasein
employmentinthefishingindustrywithin
RomaniaduetotheEU'sCommonFisheries
Policy,whichplacesrestrictionsonthetotal
tonnageofcatchthatcanbelanded,causedby
overfishingintheBlackSea.Intandemwith
thedeclineofsea-fishing,commercialfish
farmsespeciallyinsalmon,haveincreasedin
prominenceintheriversandlochsoftheeast
ofRomania.Inlandwatersarerichinfresh
waterfishsuchassalmon,trout,andin
particular,carpwhichtraditionallyhasbeenthe
mostpopularfish,includingitseggs(icre),
freshorcanned.

 Industry
Romaniahasbeensuccessfulindeveloping
itsindustrialsectorinrecentyears.Industry
andconstructionaccountedfor32%of
grossdomesticproduct(GDP)in2003,a
comparativelylargeshareevenwithout
takingintoaccountrelatedservices.The
sectoremployed26.4%oftheworkforce.
Romaniaexcelsintheproduction
ofautomobiles,machinetools,and
chemicals.In2013,some
410,997automobileswereproducedin
Romania,upfrom78,165in2000.
In2004Romaniaenjoyedoneofthelargest
worldmarketshareinmachinetools
(5.3%).Romanian-basedcompaniessuch
asDacia,Petrom,Rompetrol,
Bitdefender,RomstalandMobexperthave
expandedoperationsthroughouttheregion.
However,small-tomedium-sized
manufacturingfirmsformthebulkof
Romania'sindustrialsector.

Regional variation
ThestrengthoftheRomanianeconomyvariesfromregiontoregion.GDP,andGDPper
capitaishighestinBucharest.ThefollowingtableshowstheGDP(2005)percapitaofthe
4countiesand2areas,withdatasuppliedbyEurostat.
Rank

Place

GDP per capita

(US$)

1 Bucharest

27,344

2 Cluj

26,934

3 Timi

25,121

4 Braov

24,788

5 Constana

24,696

ThehighestGDPpercapitaisfoundinBucharestandsurroundingIlfovCounty.
ValueswellabovethenationalaveragearefoundinTimi ,Arge ,Bra ov,Cluj,
Constana,SibiuandPrahova.Valueswellbelowthenationalaveragearefound
in:Vaslui,Botoani,Clrai,Neam,Vrancea,Suceava,Giurgiu,Mehedini,Oltand
Teleorman.

Foreign trade of Romania

In 2012,Romania's largest trading partner wasGermany, followed
byItaly. Romania's main exports to Germany were insulated wire, cars
and vehicle parts, whereas its main German imports are cars and
vehicle parts. The principal Italian imports to Romania include hides,
footwear parts, medicaments, telephones and vehicle parts. Romania's
chief exports to Italy included leather footwear, cars, telephones,
tobacco, men's suits, seats and iron pipes.

International trade
Exports

US $45.0 billion f.o.b. (2007)

Imports

US $63.0 billion f.o.b. (2007)

Current account

US $18.0 billion (2007)

Export partners

Italy 20.4%, Germany 17%,

France 14% (2007)

Import partners

Italy 23.4%, Germany 16%,

France 12% (2007)

AchartofRomania'sexportproducts

Romaniaseconomicfreedomscoreis66.6,makingitseconomy
the57thfreestinthe2015Index.Itsscoreis1.1pointsbetterthan
lastyear,reflectingimprovementsinfreedomfromcorruption,
laborfreedom,andthemanagementofgovernmentspendingthat
outweighadeclineinbusinessfreedom.Romaniaisranked27th
outof43countriesintheEuroperegion,anditsoverallscoreis
higherthantheworldaverage.
With a steady five-year increase in economic freedom,
Romania joins a growing trend in Eastern Europe. Since
2011, economic freedom in Romania has improved by
nearly 2.0 points. Advances in six of the 10 economic
freedoms include particularly impressive gains in reducing
corruption and loosening labor regulations. In the 2015
Index, Romania has achieved its highest economic freedom
score ever.
However, even with these improvements and membership in the
European Union, Romanias status as a transitional economy is still
apparent. Judicial independence is precarious, and the government has
struggled to meet EU anti-corruption requirements. Despite progress,
the business environment remains inefficient, a remnant of the countrys
Communist past.

Romaniastransitiontoafree-marketeconomybeganwith
theadoptionofitsnewconstitutionin1991.Inthepost
ColdWarperiod,Romaniadevelopedclosertieswith
WesternEuropeandwasacceptedintoNATOin2004and
theEUin2007.PresidentTraianBasescuhasservedsince
2004andhassurvivedmultipleimpeachmentattempts.After
yearsofgrowth,Romaniaexperiencedadeeprecessionasa
resultofthe2008globalfinancialcrisis.Modestgrowthhas
resumed,andthegovernmenthasmadeprogressinreducing
thepublicdebtandbudgetdeficit.Privatizationofmajor
statecorporationshascontributedmateriallytoprivatesectorgrowth.Inadditiontoitsstrategicpositiononthe
BlackSea,Romaniahasextensivenaturalresources,a
productiveagriculturesector,andthepotentialforstrong
growthinindustryandtourism.

RULE OF LAW

Despitesomeimprovement,corruptionremainsaseriousproblem.Accordingtothe
EuropeanCommission,thereisalackofbestpracticesforpublicprocurement,
andthecompetentadministrativebodiesdonotapplyeffectivecontrolstodetect
conflictofinterestandcorruption.Thecourtscontinuetosufferfromsuchchronic
problemsascorruption,politicalinfluence,staffingshortages,andinefficient
resourceallocation.

GOVERNMENT SIZE
Romaniastopindividualandcorporateincometaxratesare16percent.Othertaxes
includeavalue-addedtaxandenvironmentaltaxes.Theoveralltaxburdenisequalto
28.2percentofgrossdomesticproduct,andgovernmentexpendituresamountto35.4
percentofdomesticproduction.Publicdebtisequivalentto39percentofthedomestic
economy.

REGULATORY EFFICIENCY
Launchingabusinesstakesfiveproceduresandslightlymorethanaweekon
average,butefficientbankruptcyproceduresandruleshavenotbeenfully
implemented.Laborregulationsremainrigid,althoughtherehavebeen
amendmentstoimprovethelaborcodesflexibility.Thegovernmentlisted
privatizationandmarketliberalizationasmajorprioritiesfor2014buttookno
actiontoenddistortingsubsidies.

OPEN MARKETS
EUmembershavea1.0percentaveragetariffrate.Althoughsomenon-tariff
barriersexist,theEUisrelativelyopentoexternaltrade.Despitebureaucratic
challenges,Romaniadoesnotgenerallydiscriminateagainstforeigninvestment.
Overall,thefinancialsectorhascopedwellwiththeeffectsoftheeconomic
downturn.Bankingsupervisionhasbeenenhanced,butthelevelof
nonperformingloansremainshigh.

Long-Term Score Change (since 1995)