Romania: Economic and Political Overview
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Due to the 2009 financial crisis, Romania endured an economic slowdown, especially in the automobile sector, which is subject to foreign demand. Financial difficulties pushed the country to seek financial help from the IMF, the European Commission and the World Bank. More recently, the Romanian economy was among the fastest-growing in the EU; nevertheless, the global crisis brought by the COVID-19 pandemic caused a drop in GDP in 2020, from which the country recovered fast in 2021. In 2022, the country continued on its growth path, with an estimated GDP increase of 4.5% thanks to strong gross fixed capital formation and private consumption (EU Commission). For 2023, the negative effect of still high inflation, tight financing conditions and weaker performance of partner economies are all set to lower Romania’s real GDP growth to 2.5% (3.1% according to the IMF), with investment expected to remain strong, supported by the Recovery and Resilience Facility and other EU Funds. As internal and external conditions improve, the economy is expected to grow by 3% in 2024.
Concerning public finances, the country experienced an expansionary trend in recent years, with a government deficit averaging above 4%, largely driven by pension increases. This trend was reinforced by the impact of the COVID-19 crisis and of the measures taken to mitigate the impact of high energy prices, resulting in an estimated budget deficit of 5.8% of GDP in 2022. As the energy support schemes (including caps on electricity and gas to households and to a lesser extent firms) will be financed by windfall taxes, the impact on the budget should be limited in 2023, with the IMF projecting the deficit at 4.7% of GDP. At 49.7% in 2022, the debt-to-GDP ratio is expected to follow an upward trend over the forecast horizon, at 51.7% this year and 51.9% in 2024 (IMF). The 12-month average inflation stood at 12% in 2022 (EU Commission) as a consequence of high energy and food prices and the spill-over effect on other components. HICP inflation is projected at 9.7% for 2023 before slowing down to 5.5% in 2024 due to the extension of the energy price cap, lower commodity prices and base effects kicking in.
An ageing population, the emigration of skilled labour, significant tax evasion, insufficient health care, and an aggressive loosening of the fiscal package may compromise Romania’s long-term growth and economic stability and are the economy's top vulnerabilities. Despite a relatively low level of unemployment (at 5.5% in 2022), Romania remains one of the poorest countries in Europe, with 34.4% of the population at risk of poverty or social exclusion (the highest ratio in the EU - data by Eurostat). The IMF estimated the country’s GDP per capita (PPP) at USD 38,097 in 2022, still 29.4% below the EU average.
| Main Indicators | 2020 | 2021 | 2022 (E) | 2023 (E) | 2024 (E) |
| GDP (billions USD) | 251.70 | 285.61 | 301.85 | 348.90 | 376.67 |
| GDP (Constant Prices, Annual % Change) | -3.7 | 5.9 | 4.8 | 2.4 | 3.7 |
| GDP per Capita (USD) | 13,022 | 14,874 | 15,851 | 18,530 | 20,175 |
| General Government Balance (in % of GDP) | -4.6 | -7.7 | -5.9 | -5.4 | -5.1 |
| General Government Gross Debt (in % of GDP) | 49.4 | 51.1 | 48.7 | 48.3 | 49.3 |
| Inflation Rate (%) | 2.6 | 5.0 | 13.8 | 10.5 | 5.8 |
| Unemployment Rate (% of the Labour Force) | 6.1 | 5.6 | 5.6 | 5.6 | 5.4 |
| Current Account (billions USD) | -12.44 | -20.68 | -28.00 | -27.62 | -29.05 |
| Current Account (in % of GDP) | -4.9 | -7.2 | -9.3 | -7.9 | -7.7 |
Source: IMF – World Economic Outlook Database, October 2021
Romania has a labour force of 8.38 million people out of its 19.1 million population, though this number has been decreasing over the last decade due to the massive migration of Romanian workers to Western European countries. Agriculture represents around 4.3% of Romania's GDP and employs 21% of the country's active population (World Bank, latest data available). The main resources and agricultural production in Romania are cereals, sugar beets and potatoes. However, production remains very low in comparison with the country's potential capacity (more than one-third of the land is arable). About 25% of the country is covered by forests (especially around Transylvania), and the logging industry is developing very fast. Romania has a limited energy dependence thanks to coal, oil, gas and uranium reserves. According to data from Eurostat, Romania is0 the seventh-biggest agricultural producer in the European Union. The turnover of Romanian agricultural companies was estimated at RON 58 billion in 2022, a record level due to inflationary pressures and subsidies granted by the authorities, which counterbalanced a marked decrease in crop production (KeysFin).
The industrial sector contributes 27.8% of the country's GDP and employs 30% of the active population. Thanks to inexpensive labour, its industry is diversified and competitive. Historically, manufacturing companies and the industrial sector represent the backbone of Romania's economy. For this reason, foreign direct investors are involved in heavy industry (metallurgy, steel), the manufacturing of vehicle parts, building and construction, petroleum refining and textiles. According to figures from the World Bank, the manufacturing sector alone contributes 16% of GDP. Data from the national statistical office show that Romania's industrial production fell by an unadjusted 1.8% year-on-year in 2022 due to drops in electricity, thermal energy, gas, steam and air conditioning production and supply (-9.4%), mining industry (-2.8%) and processing industry (-0.4%).
Romania's economy is mainly centred on the services sector, which represents 58.2% of GDP and employs around 49% of the nation's workforce. Tourism, in particular, has been booming in recent years, reaching an all-time high of 13.26 million in 2019 (between domestic and foreign tourism). The sector showed positive signs of recovery in the first ten months of 2022 when the total number of tourists reached 9.6 million (of which 13.7% were foreigners – data INSEE). The technology sector has also seen consistent growth in recent years, due to the emergence of a high-qualified workforce whose cost is lower than the European average. Romania's ITC sector accounts for around 6.2% of GDP (Romanian Software Industry Association). The Romanian banking sector comprises 34 credit institutions: three banks with full or majority Romanian state-owned capital, four credit institutions with majority domestic, private capital, 19 banks with majority foreign capital and eight branches of foreign banks. About 68.2% of the Romanian banking sector’s assets are held by institutions with foreign capital (European Banking Federation).
| Breakdown of Economic Activity By Sector | Agriculture | Industry | Services |
| Employment By Sector (in % of Total Employment) | 21.2 | 30.1 | 48.7 |
| Value Added (in % of GDP) | 4.3 | 27.8 | 58.2 |
| Value Added (Annual % Change) | 7.0 | 4.1 | 6.6 |
Source: World Bank, Latest Available Data. Because of rounding, the sum of the percentages may be smaller/greater than 100%.
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The Economic freedom index measure ten components of economic freedom, grouped into four broad categories or pillars of economic freedom: Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business freedom, labour freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom). Each of the freedoms within these four broad categories is individually scored on a scale of 0 to 100. A country’s overall economic freedom score is a simple average of its scores on the 10 individual freedoms.}}
Economic freedom in the world (interactive map)
Source: Index of Economic Freedom, Heritage Foundation
The business rankings model measures the quality or attractiveness of the business environment in the 82 countries covered by The Economist Intelligence Unit’s Country Forecast reports. It examines ten separate criteria or categories, covering the political environment, the macroeconomic environment, market opportunities, policy towards free enterprise and competition, policy towards foreign investment, foreign trade and exchange controls, taxes, financing, the labour market and infrastructure.
Source: The Economist Intelligence Unit - Business Environment Rankings 2020-2024
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Latest Update: September 2023
