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Romania - Overview

Contents extracted from the comprehensive atlas of international trade by Export Entreprises

Introduction

Capital:: Bucharest
Area:: 238 km2
Total Population:: 20.077
Annual growth rate:: -0.00%
Density:: 87.00/km2
Urban population:: 53%
Population of Bucharest (2.151), Iași (315), Cluj-Napoca (316), Timisoara (315), Constance (300)
Official language: Romanian, spoken by 89.4 % of the population.
Other languages spoken: It is important to note that the Hungarian and German are also widely spoken in the country. Regarding foreign languages, the most commonly spoken in Romania are English and French. After a decade, the speaking of Russian has slightly diminished.
Business language: French, English and German.
Ethnic Origins:: Romanian 89.5%; Hungarians 6.6%; Romas 2.5%; Ukrainians 0.3%; Germans 0.3%; Russians 0.2%; Turks 0.2%; Other 0.4%
Beliefs: Orthodox 86.9%; Protestant 7.5%; Catholic 4.7% Other 1%
Telephone codes:
To make a call from: 0
To make a call to: +40
Internet suffix:: .ro
Type of State::
Social Republic based on parliamentary democracy.
Type of economy::
Upper-middle-income economy, Ex-Transition country
Romania has developed a market economy and has initiated programs to privatize public enterprises. The country is trying to catch up to the criteria and standards imposed by the European economic model.

Economic overview

Since the early 1990s, successive governments have gradually promoted a liberal economic policy to privatize the state owned companies. Following its accession to the European Union in January 2007, Romania has begun a new phase of economic growth with substantial foreign investments. Like many other countries of the former Soviet bloc, its economy has been transformed into a market economy. The GDP has grown at a regular rhythm and a middle class has developed. Romania has become the second most dynamic country in the region after Poland. The unemployment rate, which was quite low before the financial crisis, has been growing since 2008 and reached 7.5% in 2013. Romania has one of the lowest public debts in the EU (38.2% of the GDP in 2013) and inflation was stabilized, and then reduced, at 4.5% in 2013.

However, even if Romania enjoys a significant potential, notably due to its rich agricultural land and its well-educated and high-qualified workforce, it still remains one of the poorest countries in Europe with a poverty rate of 6% of the population. Due to the financial crisis, Romania endured a strong economic slowdown, especially in the automobile sector which is subject to foreign demand and the country entered into recession in 2009-2010. Funding difficulties pushed Romania to get financial help from the IMF, the European Commission and the World Bank. The country managed to reduce its public deficit to 2.4% of the GDP in 2013. It  renewed with economic growth in 2012 (+1.5%) and then in 2013 (2.5%), with a 2014 forecast of 2.1%. industrial production increased by 4.7% in 2013.

Romania maintains its objective of joining the Euro zone in 2015.

Main industries

Agriculture represents 6.5% of Romania's GDP and employs 28% of the country's active population. The main resources and agricultural production in Romania are cereals, sugar beets and potatoes. However, the production remains very low in comparison with the country's potential capacity. About 25% of the country is covered by forest (especially around Transylvania) and the logging industry is developing very fast.

The industrial sector has contributed to 38.3% of the country's GDP and employed a third of the active population (33%). Historically, the manufacturing companies and the industrial sectors represent the backbone of Romania's economy. That is why many foreign direct investors are involved in heavy industry (metallurgy, steel), the manufacturing of vehicle parts, building and construction, petroleum refining and textiles. However, during the last few years, new technologies have been moving forward due to the growth of high-qualified workforce whose cost is lower than the European average.

Romania's economy is mainly centered in the services sector, which represents 51.7% of the GDP and employs around 39% of the nation's workforce. Tourism, in particular, is booming.

Foreign trade overview

Romanian exports have increased by almost 30% between 2006 and 2008. Imports have followed the same trend but with a volume of about twice that of export (an increase of almost 60%). Since then, Romania has remained very dependent on imports. The global economic crisis has accentuated the deficit in the balance of payments since 2009. In addition, Romania's main partners are also in economic difficulties themselves and the level of exports has decreased in a parallel way. the industrial production has increased by 4.7% in 2013 and agriculture also increased by 5%. However exports, going in the proportion of 55% to a euro zone in recession, have dropped.

Romania's main export partners in 2013 were Germany (around 18% of exports), Italy, France and Turkey. The country traditionally and mainly exports industrial products. In 2013, the deficit of the country's trade balance has not decreased and it should remain in 2014.

Romania's main suppliers are Germany (around 17% of imports), Italy, Hungary and France. Imports have been rising since 2011. This growth can be explained essentially by the needs of export-oriented industrial activity. The strongest growth was therefore recorded in imports of electric and mechanical equipment and metal products (25% and 31% respectively), while the part of imports of consumer goods has been smaller.

Trade results in 2014 will depend on the dynamism of the euro zone economies.

FDI

In a context where global foreign investment increased by 10.9% in 2013, in particular in Europe (+25.2%) and in Latin America (+17.5%), FDI flows to developing economies reached a new high of US$759 billion. However macroeconomic fragility and policy uncertainties are driving investors to caution.

The government, which launched a number of privatization programs to attract foreign investors, benefited from spectacular FDI flows before the global financial crisis (more than EUR 9 billion in 2007 and almost EUR 14 billion in 2008). However, the financial crisis had a negative effect on FDI flows coming into Romania: they dropped by 50% in 2009 and have been decreasing since. To counter the effects of the crisis, the country received a 13 billion EUR aid package from the IMF and another in 2011, in order to deal with the challenges it needs to overcome.

In 2013 FDI in Romania reached only USD 2.5 billion.

The distribution of foreign direct investment by sectors is led by the industrial sector (more than one third of the total), in which the metallurgy industry stands out. Other activity sectors have attracted investors such as banking and insurance, wholesale and retail, energy, construction and telecommunications. The regions which attract the most foreign capital are, in order of importance: Bucharest (more than 60% of the total), the country's center and the south. Romania has numerous advantages: in addition to a large domestic market, the country has a strong industrial tradition, coupled with a cost of labor among the lowest in the EU. This has been the reason for the development of a significant industrial sector, particularly car making, but also of the services .

In 2013, the main investors in Romania have been France, Austria, the Netherlands, Germany and the Czech Republic. The Czech company CEZ has invested over EUR 1 billion since 2011, in order to install a park of 240 wind turbines near the Black Sea.

Information on the 2013 FDI influx in this region can be accessed in the Global Investment Trade Monitor published in January 2014 by the United Nations Conference on Trade and Development (UNCTAD).

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