• 1991 – 1992: Further Attempts to Reform in Romania

Academic Research paper and Study of the Economy of Romania and Romanian Business

The next two years followed with an accelerating drop in production in Romania. The first official reported unemployment rates for Romania (Figure 3.5) witnessed a strong increase from 3% (1991) to 8% (1993) within a single year, despite the fact that the massive lay-offs were buffered by retirements and the Romanian land reform from 1991 (cf. chapter, which reversed the migration trend from urban to more rural parts of the country (cf. Ianoș 2006: 609ff.).

Further important reforms took place in Romania of 1991. After two additional rounds of price liberalization some 80 % of prices could be set by the markets. Romanian import quotas were abolished and tariffs reduced; new incentives for exporters were set and state owned enterprises somehow commercialized. Two new privatization laws followed (cf. Demekas & Khan 1991: 47).

Overall, the first three years of Romanian reforms might be characterized by fragile institutions and disorganization (Dăianu 2000; Dulleck 2006). These are the rapid abolishment of the old institutions without the “rapid build-up of market-based institutions” (Dăianu 2000: 9) and the failure of most operating enterprises to react flexible on new demand and supply conditions.  A surging demand of foreign goods, combined with a shun of domestic products, was financed by dissaving and the drain of the anyhow scarce foreign reserves (ibid: 10).

The Romanian exchange rate (Figure 3.12, chapter remained overvalued and though many prices (such as basic consumption, energy, heating and sewerage) remained subject to controls anyway, the IMF supported program from 1991 failed to stop boosting inflation in Romania (cf. ibid. and Figure 3.12 in chapter Prices for energy and raw materials remained artificially low. Notable FDI-inflows remained absent as privatizations were not backed by neither sufficient property rights (ibid: 10ff.) nor a predictable future, despite the reforms.