ROMANIA

ROMANIA

Romania joined the European Union on 1 January 2007. Romania is the 22nd largest economy in Europe (and the 17th in the EU) by total Gross Domestic Product (GDP). Going through the most severe recession in two decades, Romania is relying on a 20 billion Euro package in loans from the International Monetary Fund (IMF) and the European Commission to finance its deficit.

Romania began to feel the effects of the global downturn in financial markets and trade in the last quarter of 2008. In 2009, the GDP fell more than 7 percent, prompting the Government to seek an emergency assistance package from the IMF, the EU and other international lenders. In 2010, drastic austerity measures were implemented as part of IMF-led agreement, and a further 1.9% contraction of the GDP was registered. The economy is expected to return to growth in 2011. (Source: UNDP Romania)

ROMANIA - A GREAT OPPORTUNITY FOR BUSINESS

Main Country Data

  • Total area:

    238,391 sq. km (11th largest in Europe and 79th largest worldwide)

  • Population:

    21,462,000 (Jan. 2010)

  • Capital:

    Bucharest, 1,944,451 population

  • Main cities, above 300,000 population:

    Brasov, Cluj-Napoca, Constanta, Craiova, Galati, Iasi, Timisoara

  • Currency:

    Romanian Leu (RON)

  • ISO 3166 code:

    RO

  • Internet TLD:

    .ro (the .eu domain is also used, as in other European Union member states)

Economic Outlook and Forecast

Before the global economic recession, Romania enjoyed almost a decade of steady economic growth, thanks to a strong demand in EU markets. Domestic consumption and investments have fueled strong GDP growth, but have also led to a widening account deficit. From the 2008 great economic expansion, when a credit-fuelled consumption made Romania the EU’s fastest-growing economy, the country plunged into recession in 2009 when the GDP fell by more than 7%.

This prompted the Government to seek multilateral support, including from the IMF, the European Commission and the World Bank Group. The international community agreed to support the reforms committed to by the Romanian government with a package totaling EUR 19.95 billion over the period 2009-2010. Austerity measures were implemented through 2010, yet the GDP contracted by another 1.9% in the same year. Nevertheless, the country’s fiscal performance to date sends encouraging signals with respect to resumed growth in 2011. Analysts forecast a growth in GDP of 1.5% in 2011, followed by a growth of 4.4% in 2012. (Source: Central Bank Governor, Mugur Isarescu)

Economic Highlights

INFLATION: The inflation rate rose to 8 percent in December 2010, more than double the 3.4 percent forecast. IMF predicts that inflation will average 5.2% in 2011.

BUDGET DEFICIT: The administration plans to narrow the budget deficit to 4.4% GDP, in 2011, compared to the 7.8% in 2010, in line with its international borrowing agreements. In December 2010, Romania's parliament approved an austere budget for 2011 that will allow for these budgetary cuts.

MINIMUM BASE GROSS SALARY: From 15 May 2016, the guaranteed minimum base gross salary is established at RON 1250 per month for a work schedule of an average of 170 hours monthly, representing RON 3.94 per hour.

UNEMPLOYMENT: As key reforms in public sector are advancing and a unified wage law for the public sector was approved, the unemployment rate has begun to stabilize. At the same time, the creation of new jobs in the private sector is more difficult. Unemployment will be around 7% in 2011 (i.e., the lowest in the region in all three years), according to the IMF’s forecast.

EXPORTS: With consumer confidence and economic sentiment gradually improving and export-oriented industry continuing to grow, recent indicators suggest growth will turn positive in 2011.

Economic Indicators

Indicators

2007

2008

2009

2010

2011

2012

2013

GDP per head (Euro)

5,938

6,501

5,611

5,903

N/A

N/A

N/A

GDP per head ($ at PPP)

9,927

12,001

11,013

11,203

N/A

N/A

N/A

Economic Growth (% GDP change)

6.3

7.3

-7.1

-1.9

N/A

N/A

N/A

Government consumption (% of GDP)

12.3

12,3

12,3

12.9

N/A

N/A

N/A

Budget balance (% of GDP)

-2.5

-3.9

-8,3

-7.8

N/A

N/A

N/A

Consumer prices (% change per year)

4.84

4.16

5.6

5.9

N/A

N/A

N/A

Public debt (% of GDP)

21.8

13.4

23.9

40.1

N/A

N/A

N/A

Labour costs per hour (USD)

3.2

3.8

4.2

4.7

N/A

N/A

N/A

Recorded unemployment (%)

4.3

3.9

6.3

9.0

N/A

N/A

N/A

Current-account balance (% GDP)

-13.9

-10

-4.4

-5.5

N/A

N/A

N/A

Foreign-exchange reserves (mUS$)

39,956

39,468

28,300

32,4300

N/A

N/A

N/A
  • Ease of Doing Business in Romania

    The International Finance Corporation and the World Bank Doing Business 2011 data for Romania provides the overall "Ease of Doing Business" rank out of 183 economies and the rankings by several topics: www.doingbusiness.org/data /exploreeconomies/romania/

  • Legal Updates

    www.tpa-horwath.ro/2012/06/tax-legal-newsletter-may-2012/

  • Legal system

    Parliamentary Republic: following the socio-economic and political changes in 1989, a new Constitution was adopted in 1991 and subsequently amended in 2003.

  • Parliamentary political parties

    Democratic Liberal Party (PDL);
    National Liberal Party (PNL);
    Social Democrat Party (PSD);
    Democratic Alliance of Hungarians in Romania (UDMR);
    Conservatory Party (PC);
    National Union for Progress in Romania (UNPR)

  • Head of state

    President: Traian Basescu.

  • TAX

    Expatriate's Tax Guide to Romania:
    A publication that provides foreign individuals planning to work in Romania and organizations intending to send individuals to Romania with a broad understanding of the country's tax, labour and immigration laws: http://www.pwc.com/ro/en/Publications/Assets/Assets_2011/Expates_Guide.pdf

    Tax alerts:
    http://www.taxonline.ro/en/news/tax-legal-alerts-27

  • National legislature

    Bicameral 471-seat Parliament composed of the Senate (137 seats) and the Chamber of Deputies (334 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

    Legislative elections were held in Romania on 30 November 2008. The first round of 2009 Romanian presidential elections was held on 22 November, and a second one on 6 December. Next parliamentary and presidential elections are due in 2012 and 2014,

  • Reports

    Exchange Rates: daily values, monthly and annual averages - http://www.bnr.ro/Exchange-rates-1224.aspx

    NBR's Reference Interest Rate: monthly values -
    http://www.bnr.ro/NBR's-Reference-Interest-Rate-3317.aspx

    Monetary Policy Rates: policy rate, lending facility, deposit facility- http://www.bnr.ro/Monetary-Policy- Indicators-3318.aspx

    Inflation Reports: chart's data-sets - http://www.bnr.ro/Inflation-Reports-3343.aspx

    External Sector Indicators: balance of payments, external debt, international investment position -
    http://www.bnr.ro/Balance-of-Payments-and-International-Investment-Position-6112.aspx

  • National government

    Cabinet, headed by the Prime Minister, nominated by the President and endorsed by the Parliament. The current government is a coalition of the Democratic Liberal Party (PDL) and the Democratic Alliance of Hungarians in Romania (UDMR).

    Prime Minister: Emil Boc (PDL)
    Deputy Prime Minister: Markó Béla (UDMR)