Romania Facts

Population

Romania is a country with a population of 23 million people. It is a land rich in natural resources, however most of its people are suffering from extreme poverty. The average income for Romanians is $100.USD per month. The cost of living is similar to North America.

Recent Economic Developments

Romania’s transition from communism to a market economy has not been as quick as many more developed markets such as Hungary or the Czech Republic although recent indications are that it may be picking up speed. According to official statistics, since the 1989 revolution and the overthrow of communism, the Romanian economy has shrunk considerably. The primary culprits have been political instability as well as poorly designed or non-existent reform and development policies (perhaps most importantly, a failure to implement recently enacted reform measures).

At the same time, the Romanian market offers tremendous long-term potential for economic growth. Romania’s labor pool is well educated and its market of 23 million is geographically in a very strategic portion of Europe. Finally, and perhaps most importantly, Romania was recently made an associate member of the European Union and is now pressing to become a realistic candidate for EU membership in the coming years.

Recent Political Developments

Prior to 1996, the national government completed few serious economic reforms, thereby avoiding many of the attendant social costs related to large-scale privatization and economic restructuring.

The previous government, elected in 1996, unveiled an ambitious reform program in 1996 to much fanfare that was only partially implemented. In particular, large-scale privatization was much slower than anticipated. At the same time, they made rapid privatization of remaining large state-owned companies a top priority in the months leading up to the November 2000 elections.

Prospects for the Coming Years

The prognosis for significant economic development in Romania in the immediate future is mixed. Government officials are optimistic and even predict a minimum growth rate of 1.3% in 2001. Independent experts are more cautious because significant reforms in such areas as internal and foreign investment, reducing tax and regulatory burdens, and the privatization of large-sized companies is ongoing. At the same time, experts are generally in agreement that the outlook beyond 2001 is bright and recent projections show GDP growth reaching 5-6% in 2003 and thereafter.

Taxation

The domestic tax burden in Romania is relatively high although investors typically complain more often about frequent changes to the underlying tax laws in Romania rather than the rate itself. Those frequent changes have made accurate tax planning quite difficult.

Crime, Fraud and Corruption

Many investors have indicated that Romania suffers from significant corruption throughout its economic, judicial and political system even though laws designed to address such corruption exist. At the same time, the type of criminality associated with such corruption prevalent in former Soviet countries is not widespread.

 Map of Romania

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