Global Perspectives
National Economic Profiles from IIC Partners
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Romania
KM Trust & Partners
BUCHAREST – Romania began the transition from Communism in 1989 with a largely obsolete industrial base and a pattern of output unsuited to the country's needs.
In recent years, integration into the larger European and global economy has accelerated.
The second largest economy in Central Eastern Europe, with about 22 million inhabitants, Romania emerged in 2000 from a punishing three-year recession thanks to strong demand in EU export markets. Despite the global slowdown in 2001-02, strong domestic activity in construction, agriculture, and consumption have kept GDP growth above four per cent.
The Romanian government has pushed disinflation and in 2005 revalued its currency, making 10,000 'old' lei equal one 'new' leu. The economy grew at 6.4 per cent in 2006, the strongest growth in the past decade.
Romania joined the European Union on Jan. 1, 2007.
“Overall economic gains have only recently started to drive the creation of a middle class and ease Romania's widespread poverty,” says Radu Manolescu of KM Trust & Partners in Bucharest. “Bureaucracy is still a drag on the business environment but there is gradual improvement. We founded our executive search firm in 2006 in order to participate in the general economic expansion by providing the executive talent companies need for growth.”
Romania's economic strength is in the processing and the manufacturing of goods, primarily in small and medium-sized family-owned firms. Its main industries are clothing and shoe manufacturing, metal, extracting and processing of primary resources (timber, marble, rock), food processing, oil refining and chemical derivates, and to a lesser extent pharmaceuticals, heavy machinery and household electronics. In recent years vehicle manufacturing has become an important industry and the information-technology sector is also growing.
The real estate market has continued its development with an increasing interest from local and international investors and growing prices on all properties. All segments have seen an energetic development, with the retail and industrial markets benefiting the most. The residential market has seen the first signs of interest from professional developers looking for large-scale developments that will have an impact on the medium and high end markets. Residential prices are still low compared with the region and this sector probably has the most room for future growth and development.
Growth Indicators:
GDP: USD 218.9 billion (IMF 2007 est.) and increasing;
75% of economic output from private sector;
70% of companies experienced profit growth in last 3 years;
Profit margins in Romania are higher than in Poland and Hungary;
Growth factors include: private consumption, consumer credit, corporate investment and exports.
Main indicators of Romania's economy:
| # |
|
2003 |
2004 |
2005 |
2006 |
| 1 |
GDP |
70bn |
71.9bn |
96.138bn (est.) |
121.9bn (est.) |
| 2 |
GDP ( %real change pa) |
+5.3% |
+8.3% |
+4.1% |
+7.7% |
| 3 |
GDP per capita |
2350 |
2600 |
3400 |
5465 |
| 4 |
GDP per capita ( at PPP) |
7700 |
8000 |
9300 |
11000 |
| 5 |
Inflation |
14% |
9.2% |
8.5% |
4.87% |
| 6 |
Minimum wage |
285 RON=82 |
310 RON=89 |
330RON=95 |
370 RON=105 |
| 7 |
Medium gross wage |
765 RON=220 |
870 RON=250 |
995RON=285 |
1418RON=420 |
| 8 |
Unemployment |
6.4% |
6.3% |
5.6% |
5.0% |
| 9 |
FDI |
3.9bn |
5.1bn |
6bn |
10bn |
| 10 |
Foreign-exchange reserves |
14bn |
16bn |
20bn |
26bn |
| 11 |
Mobile phone users |
9,000,000 |
10,000,000 |
14,370,000 |
17,000,000 |
| 12 |
Cars production (units) |
160,000 |
240,000 |
320,000 |
500,000(est.) |
| 13 |
Internet users |
5,180,000 |
7,800,000 |
10,400,000 |
13,600,000(est.) |
Since 2000, the Romanian economy has been substantially transformed, demonstrating relative macroeconomic stability with high growth, low unemployment and declining inflation. In 2006, according to the Romanian Statistics Office, GDP growth was 7.7 per cent, one of the highest rates in Europe. Unemployment in Romania was five per cent in 2006, which is very low compared with other middle-sized or large European countries such as Poland, France, Germany and Spain. Foreign debt is also comparatively low, at 20.3 per cent of GDP.
Romania has attracted increasing foreign investment since 2000, becoming the single largest investment destination in Southeastern and Central Europe. Foreign direct investment was valued at €8.3 billion in 2006. According to a 2006 World Bank report, Romania currently ranks 49th out of 175 economies in the ease of doing business, scoring higher than other countries in the region such as Hungary, Poland and the Czech Republic. Additionally, the same study judged it to be the world's second-fastest economic reformer in 2006. The average gross wage per month in Romania is 1,418 lei as of December 2006, equating to €419.38 (US$545.36) based on international exchange rates and $846.06 based on purchasing power parity.
The Government's main objective is to continue reforms in all areas so that Romania may fulfill all her obligations, pledged during the EU accession process, and to take full advantage of EU membership. The main government priorities for the period of 2005-2008 are: development of infrastructure, economic performance improvement, agriculture and rural development and public administration reform.
Radu Manolescu is managing partner of KM Trust & Partners of Bucharest, a member of IIC Partners Executive Search Worldwide. IIC Partners has more than 50 offices in 40 countries and is ranked eighth among global executive search companies.
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