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Romania

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Last reviewed: 03 September 2009

Country information

ECONOMY

Basic Economic Facts (2008, if not state otherwise)


Nominal GDP:  EUR 136.8  
GDP per capita: EUR 6364
Purchasing Power Parity (PPP): EUR 8900  approx
GDP Growth:  7.1 %  
Inflation: currently 6.3 % (5.1% in July 2009) The inflation rate is forecast for 2009: 4.3%
Unemployment:  5. % (6.3% in July 2009)
Major Industries: food and beverages, energy, metallurgy, crude oil processing, chemicals, light machinery and textiles
Exports:  EUR 33.6 bn  (13.6 bn in H1 2009)
Imports:  EUR 51.8 bn  (17.9 bn in H1 2009
Major trading partners: Exports  – EU 60.1%, of which Italy  18.1%, Germany 15.8%, Turkey 7.7%, France 7.5%, Hungary 5% and UK 4.8%. US 2.5%.
Imports – EU  62.5%, of which Germany 15%, Italy 14.8%, Russian Federation  8.1%, France 6.5%, and UK 2.9%, Turkey 4.9%, China 4.2%
Trade Balance:  EUR 18.2 bn deficit (4.3 bn in H1 2009)
Current Account: 12.3% of GDP deficit (5% of GDP deficit in Q1 2009)
Fiscal Balance: 5.2%  of GDP deficit (2.7% GDP deficit in H1 2009)
Foreign Direct Investments:  EUR 9 bn  
External Debts:  EUR 72.5 bn (57 bn in May 2009)
Central Bank (NBR) Reserves: EUR  26.2 bn (27.3 bn July 2009)
Exchange rate (August 09): 1 EUR = 4.20  RON; 1 USD = 2.92; RON; 1 GBP =  4.72  RON.

Economic Developments


Following the collapse of communist rule in 1989, Romania has undergone a long period of economic transition to a market economy.  Compared to its central and eastern European neighbours, this process has not been smooth or particularly well-managed, and included two periods of economic recession and financial scandals during the 1990s.  

Since 2000 there has been more progress.  An extensive programme of economic reforms has included the privatisation of a large number of state-owned enterprises and the restructuring of Romania’s energy, mining and industrial sector.   The reform programme closely followed IMF requirements for fiscal restraints and economic restructuring, particularly in the energy sector.  In 2004, the European Commission gave Romania 'functioning market economy' status.  The economy has been growing at an average annual rate of 6% since 2000, with a peak of 8.5% in 2004, mainly driven by strong domestic demand.  There has been rising demand for Romanian exports of steel, cars, and light machinery.

Agriculture remains a weakness.  It represents about 8.1% of GDP  but it is mainly of a subsistence nature.  After 15 years of slow progress, the reform of the sector has been sped up in the last couple of years but is still characterised by low productivity and small land-holdings, despite being largely in private hands.   Direct payments from CAP and rural development funds are likely to raise living standards in the poor countryside as farmers and local authorities are eagerly applying for funding.  Significant amounts of structural funding have been allocated for the 2007-2013 and despite a slow start in absorbing them Romania is expected to reap the benefits and develop its backward infrastructure.

The global financial and economic crisis hit Romania late, but hard, at the beginning of 2009.  Economic growth dropped from 7.1% in 2008 to -6.2% in the first quarter of this year.  The constructions sector went in dramatic decline, credit activity slowed down.  Both trade and current account deficits adjusted rapidly, with significant falls in growth rates.  Struggling with rising public expenditure and lower revenues, the Government requested IMF and EC financial assistance in March.  The agreed package totals €19.95 bn with the first tranche being disbursed to the Central Bank in May.  The IMF agreement should have a positive impact on investors’ confidence.  Political opinion was divided about the package.  The Liberal Democrats showed constant support for the agreement and played a key role in negotiations.  The minority coalition party, the Social Democrats (PSD), were originally against any approach to the IMF and the political costs for them might be significant as they control the social ministries like Education, Labour and Health.  In the medium term, President Basescu is hopeful that the IMF agreement could force reform to the public sector that would otherwise have been unlikely.  

A first IMF assessment mission took place in August, and revised projections and targets were agreed with the government: negative economic growth of 8.5% and a budget deficit of 7.3% for 2009.  The IMF team recommended that part of the next two tranches go towards covering the deficit.  Significant and consistent cuts in public expenditure over the next 4 years will be necessary to bring down the deficit to below 3% of GDP.



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Contacts

Romania, Bucharest, British Embassy

Address:

British Embassy, 24 Jules Michelet
010463 Bucharest, Romania

Telephone:

Visa (40) (21) 201 7300
Main (40) (21) 201 7200

Fax:

(40) (21) 201 7299 Chancery
(40) (21) 201 7317 Consular
(40) (21) 201 7315 Management
(40) (21) 201 7311 Trade Development

Email: Press.Bucharest@fco.gov.uk

Office hours:

GMT:
Mon-Thurs: 0630-1500; Fri: 0630-1400
(From last Sun Oct - last Sun Mar)
Mon-Thurs: 0530-1400; Fri: 0530-1300
(From last Sun Mar - last Sun Oct)

Local Time:
Mon-Thurs: 0830-1700; Fri: 0830-1600

Website: http://ukinromania.fco.gov.uk