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Country Profile


Key Economic Data and Figures for Romania
Year 2007 2008 2009
GDP 121.4 Bln € 130.4 Bln € 152.1 Bln €
GDP per capita 5,600 € 6,100 € 7,100 €
GDP per capita PPS 10,100 € 10,400 € 11,000 €
GDP Growth Rate 6.0% 9.1% 6.0%
FDI – Inflows
FDI Stocks N/A
FDI Stock as

Percentage of GDP

N/A
Inflation 4.84% 7.7% 4.8%
Exchange Rate

lei/Eur

3.34 3.67 4.30
Unemployment Rate 4.7% 4.6% 4.5%
Activity Rate 63% 63.9% 64.9%
Population Size 21.56 Mio 21.52 Mio N/A
Average Household Size 2.8 2.8 N/A
Current Account -14.1% -13.2% -12.2%
Trade Balance -14.7% -14% -12.7%
Public Deficit -2.6% -4.8% -4.7%
Public Debt 19.21% 21.21%
External Debt $42,760 Mio $74,540 Mio
Doing Business Ranking 49 47 47
Salary Growth 21.8% 21.8% 9.7%
Real Wage Growth 14.8% 12.3% 4.8%
Sources: CNP, Eurostat, INS

Romania is a full member of the Europan Union (after the fifth round of EU Enlargement in 2007) and the second largest market among the Central and Eastern European Countries (CEEC) if EU-Member states are considered, only. Overall, it is the seventh largest member and market of the European Union (EU) according to population size. Beside its viable demoestic market, Romania enjoys a strategic position, as it connects markets from South-Eastern Europe and Eastern Europe with Western Europe Markets. The Romanian ports at the Black Sea are the most important ports in the entire Region and the waterways of the Danube connect Central Asian markets easily with Central European and Western European markets.

The economy of Romania features a strong growth, with growth rates between 6 % and 9.1 % in the last years, while some sectors of the Romanian economy exhibited even higher growth rates of over 30 % a year. Salaries and labor costs are low, and even if like in other the double digit growth of Romanian salaries to be observed in the last years will persist, it would last another 20 years to catch up the level of Western european salaries and labor costs. Human capital in Romania, though is appreciated among investores for a qualified labor force.

The business environment of Romania is a viable one and well ranked in the Doing Business reports of the World Bank of the last years. Business surveys among among investors in Romania show most investors to be happy with their business in Romania and qualify the country as an competitive destination for foreign direct investment. Though, FDI in Romania perfers certain locations.

Romania – The Name and the Language

The country name »Romania« refers to the latin roots of the country and the population, which has been a former part of the Roman Empire. Still, Romanian is the most appropriate language to latin, when grammar is concerned, and 90% of the Romanian language words have a latin root.

Geography, Adminstratice Units and Important Cities in Romania

Romania is a central state with 41 administrative entities (Romanian: judeţe, sg.: judeţ – en.: counties) and the municipality Bucharest (Romanian: municipiu). On average each county is host to about 500,000 inhabitants. Overall, Romania has currently about 21,5 million inhabitans from which about 2 million live in the Capital Bucharest. Roughly some 45 % of the population lives in more rural areas, other important cities are Arad, Brasov, Cluj-Napoca, Constanta, Iasi, Oradea, Sibiu or Timisoara.

For statistical purposes and in the development policy framework of the European Union Romania is divided into eight development regions on the NUTS-II level. The counties of Romania serve as NUTS-III units. A more historical approach would distinguish as regions of Romania Transylvania in the middle, the Banat in the West, Moldova in the East, Walachia in the South and the Dobrudja at the Black Sea.

Romania has as neighbors the Ucraine in the North and the East, together with the Republic of Moldova, Hungary in the West, and Serbia and Bulgaria in the South.

Demographics of Romania

Romania has currently some 21,500,000 inhabitants and a sightly negative population growth, which can only partly be attributated to the viable migration potential from Romania. Rather than migration a low fertility rate and, hence, a slow agening of the society are the main drivers of the population loss in the last years. Accordingly, Romania’s population could shrink in the next 20 years down to some 16,000,000 inhabitants if this trend should persist. Concerning migration, Romanian migration is mostly short-term based, hence, people return after some month of work abroad home and bring fresh money with them. Some millions of Romanians are often estimated to work abroad and sent in 2007 about seven billion of euros to Romania.

Some 45% of the Romanians live on the countryside, where subsistence agriculture served in recent years as a buffer for the massive lay-offs during the crisis of transition in Romania during the 1990s. On the other hand, most young people left the countryside so that many villages host virtually the elderly and children, only.

Economy of Romania

The economy of Romania features a GDP of some 130 Billion of Euro this year (2008) and is expected to grow up to 280 Billion of Euros in the next five years. Services account for over 60% of the Romanian GDP now, though they contribute only somewhat over 30% to employment. The industrial sector has a share of somewhat over 20% in the last years and contributed likewhise to employment. The construction sector enjoys currently a real boom in Romania and reaches a share of some 7% of GDP and employment while the agricultural sector in Romania still contributes some 10% to GDP and about 30% to employment. The size of the shadow economy is often estimated to range between 25% and 35% of GDP.

The real sector of Romania gew in the last years with growth rates between 6% and 9% a year. Growth prospsects for the next years range between 4% (pessimistic scenaria if Romania will be hit by the financial crisis) and 6% each year. Inflation in Romania tempered down, the exchange rate of Romania stabilized in the last years, and though during a year some considerable fluctuations might occur, the Romanian leu seems to be in the long run rather to be on an apreciating way. The financial crisis did not seem to hit the leu, yet. Nevertheless, for daily cross border business activities exchange rate fluctuations still might be considerable. The same might be true for inflation: Romania joined recently an inflation targeting system, but is still higher as in most Western European countries. Growing energy prices on world markets and the Balassa-Samuelson effect are important drivers of Inflation in Romania in recent years.

The labor market in Romania enjoyis relatively low unemployment rates, though the real extend of unemployment in Romania might be partly hidden by a low activity rate. Obviously a large part of Romanian’s are not ready to work in the formal economy at current real wages. Net salaries in Romania enjoied however a double digit growth in the last years of often over 25% a year (depending on the branch). While this rise in labor costs seems often terrifying to investors at a first glance, one should consider that a convergence to – lets say – labor costs in Germany will not be achieved even after 20 years of double digit growth in Romania when German labor costs grow at the same by only 3% a year. The current average salary in Romania amounts to some 350 Euro, but much over 50% of employees in Romania earn even less.

Business & Trade in Romania

Romania features a viable business environment and is one of the most attractive destinations for foreign direct investment in the European Union. However, economic activities are concentrated in the Capital Bucharest and some economic centers in Romania, which are mainly in the more developed Western part of Romania. Important branches in Romania are the automobile and automotive industrie as Ford, Renault and many supplierssuch as Continental, Michelin, Pirelli or Dräxlmeier run several plants in Romania. Further plants for electronics might be represented by the prominent examples of Nokia or Samsung. But also the software industry, call centers, financial services, banking, real estate and property trades enjoy currently a boom. The construction sector even suffers from a lack of available labor as demand is much higher than supply. Prime-Minister Calin Popescu-Tariceanu announced this year that his vision of a developed Romania is to be the regional leader in the automotive and IT-industry. A vision, which might seem conceivable if Romania should continue its positive development of the past years.

Political System of Romania

Romania is a republic and member of EU, NATO and UNO. The political system is usually considered to be semi-presidental and represantitve. The current Romanian constitution came into force in 1991 and was slightlxy revised in 2003. This year, 2008, a new Government remains to be elected in November.