Country profile

Romania is a new member of the European Union, the 19th largest economy in Europe by total Gross Domestic Product (GDP). The EU is Romania’s most important trading partner, with 64.9 percent of trade coming from EU countries. Its capital, Bucharest, is one of the largest financial centres in the region. Although Romania stands to benefit from the size of its market (nearly 22 million people), the second largest population (after Poland) among the 10 Eastern European countries, it ranks sixth in terms of GDP.

Basic country data

Total area: 238,391 sq km (11th largest in Europe and 79th largest worldwide)

Population: 21,565,10 on 1st January 2007 (- trend, from 21,623,80 on 1st July 2005)

Main towns, population in '000 (1st March 2003): Bucharest (capital) 2,016; Iasi 350; Constanta 327; Brasov 316; Craiova 314; Timisoara 309; Galati 303; Cluj-Napoca 297.

Currency: Leu=100 bani; the plural of Leu is Lei.

Exchange rate (as of 12th February 2009): Lei 3,302/ US$; Lei 4,272/ €1

* source: INS (Institute of National Statistics) and Economist Intelligence Unit.
 

* provisional data
In the 2006 global HDR (which uses data up to 2004), Romania leaped for the first time from the Middle to the High Human Development Category, ranking 60th in terms of human development, just ahead of Malaysia (61th ), Bosnia and Herzegovina (62th) and the Russian Federation (65th), but behind Bulgaria (54th ), Cuba (50th) or Hungary (35th).

Legal system
Parliamentary republic; a new constitution was adopted in 1991 and amended in 2003.

National legislature
Bicameral Parliament composed of the Senate (137 seats) and the Chamber of Deputies (332 seats). Both chambers are directly elected from 41 multimember constituencies, comprising 40 counties and the Municipality of Bucharest.

Electoral system
Universal direct suffrage over the age of 18.

National elections
November 28th 2004 (legislative and presidential); presidential second-round run-off: December 12th 2004. Next parliamentary and presidential elections due in 2008 and 2009, respectively.

Head of state
President, currently Traian Basescu.

National government
Cabinet, headed by the Prime Minister, nominated by the President. The current government is a coalition of the Democratic Liberal Party (DLP),  and the Social Democratic Party (PSD) - Conservative Party (PC) . 

Main political parties
Democratic Liberal Party (DLP); National Liberal Party (PNL), Social Democrat Party (PSD), Greater Romania Party (GRP); Hungarian Democratic Union in Romania (HDUR); Romanian Conservator Party (RCP).

Prime Minister:

Emil Boc (DLP)

Deputy Prime Minister:

Dan Nica (PSD - PC)

Cabinet (to be valided on 22. 10. 2008)

• Minister of Foreign Affairs:  Cristian Diaconescu (PSD-PC)
• Minister of Economy: Adrian Videanu (PLD)
• Minister of Finance: Gheorghe Pogea (PLD)
• Minister of Justice: Catalin Marian Predoiu ( fmr. PNL, indepdent )
• Minister of Interior Affairs and Public Administration: Gabriel Oprea (PSD-PC) 
• Minister of Defence: Mihai Stanisoara (PLD) 
• Minister of of Transportation: Radu Berceanu (PLD)
• Minister of Education, Research: Ecaterina Andronescu (PSD-PC)
• Minister of Youth and Sports: Monica Iacob Ridzi (PDL-PC)
• Minister of Tourism: Elena Udrea (PLD) 
• Minister of Labor, Family and Social Protection: Marian Sarbu (PSD)
• Minister of SMEs, Commerce, and Business Climate: Constantin Nita (PSD)
• Minister of Regional Development and Housing: Vasile Blaga (PDL)
• Minister of Agriculture: Ilie Sarbu (PSD-PC) 
• Minister of Public Health: Ionut Bazac (PSD-PC)
• Minister of Environment and Sustainable Development: Nicolae Nemirschi (PSD-PC) 
• Minister of Cultures, Religion and National Heritage Creeds: Theodor Paleologu (PDL)
• Minister of Communications and Information Technology: Gabriel Sandu (PDL) 
• Minister delegate for the relation with the Parliament: Victor Ponta (PSD-PC)

Central bank governor: Mugur Isarescu

Economic Outlook

Romania enjoyed 10 years of consecutive economic growth. Third quater of 2008 posted ercord growth of 9.1%. IMF estiamtes real GDP growth to be  8.6.% in 2008 after a 6% growth in 2007, and warns of a growth of 2.5 % in 2009, as a result of the global financial crisis. 

Economic forecast

• Romania joined the EU in January 2007, but is being monitored by the European Commission to ensure that it meets its membership obligations in crucial areas.
• Policy will focus on the remaining large privatisations, restructuring the energy sector and investing in health, education and infrastructure. However, with EU membership secured, the removal of the accession" policy anchor" may lead to policy slippages, and the government's reliance on opposition votes in parliament will also inhibit more radical pro-market reforms.
• Fiscal and wages policies are insufficiently tight and are fuelling domestic demand, generating inflationary pressures and larger external deficits. Fiscal consolidation will become more important after 2008, once the parliamentary election is out of the way, as the authorities seek to contain external deficits.
• Strong domestic demand will result in real GDP growth of  8.6% in 2008, following a third quarter that posted 9.1% growth. Growth is expected to average and exceed 4.8% per year in 2007-11. There will be a slowdown in 2010-11, as Romania tries to bring down inflation in order to meet the criteria for euro adoption, although Romania is not likely to enter the euro zone until around 2013-14.

Forecast based on a report of the Minister of Finance based on MFP report addressing macro-economic situation for 2007 – 2010.

• Romania’s Gross Domestic Product (GDP) will continue to post a growth rate of under 5 per cent, because of the financial crisis, the trend is expected to be a downward one. Thus, from an economic growth of 6.4 per cent expected for next year, GDP would growth rate would decrease to 5.6 per cent in 2010. According to MFP, GDP growth in 2008 will be backed mainly by the favorable evolution of services and constructions. Regarding the time period 2008 – 2010, GDP average growth will be 5.9 per cent, against the background of improved internal and external economic competitiveness, which will result in a high export pace, in production matching better demand and in reducing the share of the current account deficit within GDP, based on MFP report.
• Regarding finances, the forecast indicates an improvement in the imbalance currently posted by the current account deficit, which exceeded 10 per cent of GDP, by almost two per cent over the estimations of the authorities. As MFP indicates, the forecast indicates a stagnation in the current account deficit over the next four years from 8.7 per cent, which is the level expected in 2006. In 2007, the current account deficit is expected to slightly decrease to 8.6 per cent, and in 2008 and in 2009 this will return to 8.7 per cent, whereas in 2010, it is expected to decrease to the level forecast for this year. According to MFP, the current account deficit will continue to be backed by direct investments, capital transfers and portfolio investments in a share of 80 per cent, remaining for the surplus of net current transfers to partially offset the impact of the trade deficit.
• Regarding the evolution of the inflation rate, authorities expect it to gradually decrease over the interval 2007 – 2010, going down from 4.5 per cent in 2007 to 2.5 per cent in 2010. MFP estimation is based on the trend of investments recovering in Romania but also on the consolidation of the disinflation process started in 2006. The slowdown in prices will continue over the next years, the level being 3.5 per cent at the end of 2008, and then it will reduce to 3 per cent during next year. The inflation target for 2007 was set by National Bank of Romania to 4 per cent, plus/minus one per cent, and to 3.8 per cent for 2007, with the same variation range.
• Public debt will also post a controlled growth over the next years, but its share in GDP is expected to lower, considering a high economic growth rate. The public debt level was indicating EUR 15 bln. at the end of the first semester, but foreign credits were accounting for 75 per cent of the total debt. The value of the debt corresponds to 20 per cent of GDP, a value that is low compared to the EU standards, which set a maximum share of 60 per cent of GDP. MFP estimates that in 2007 the expenditures incurred by the interests corresponding to internal public debt will be 0.3 per cent of GDP. In addition, the external governmental public debt estimated for end of next year to 11.5 per cent of GDP is expected to advance in 2008, following the State redeeming an issue of Euro-bonds worth EUR 600 M. Finances estimate that the share of the public Governmental debt within GDP registers, over 2008 – 2010, a slight decrease due to the economic growth and to falling within the 3 per cent of GDP budgetary deficit limit.
• The budgetary deficit is expected to have a downward trend over the reference interval, being constantly under 3 per cent. “The figures related to the budgetary deficit indicate that the fiscal – budgetary policy pursued on medium term will target the objective of securing funds for the development programmes, without exceeding the reference value of 3 per cent of GDP, registered in the Protocol on the procedure in case of excessive deficit”, based on the report.
• The revenues to the general consolidated budget over the time interval considered will increase from 35.2 per cent of GDP, a level proposed for next year, to 37.7 per cent of GDP in 2010. Expenditures will also follow an upward trend, increasing from 38 per cent of GDP in 2007 to 39.7 per cent of GDP over four years. Considering a breakdown in the revenue sources to the state budget, MFP anticipates that the level of the profit tax contribution, as a share in GDP, stabilise, VAT decrease its growth rate over medium term and the excise duties, as a share in GDP, continue to advance considering the compliance process with the EU legislation.
• The average number of employees will increase in the next four years so that the unemployment rate reduces from 5.6 per cent in 2007 to 5.3 per cent in 2010, based on the same report. In 2008, the unemployment rate is expected to be around 5.5 per cent and 5.4 per cent in 2009.The share of employees within total occupied population will advance in 2007 by almost one per cent, to 58.4 per cent, and the average number of employees will increase by 85,000 persons, according to MFP report.

Last update: February 2009