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After Romania's Communist regime was overthrown in late 1989, the country experienced a decade of economic instability and decline, led in part by an obsolete industrial base as well as a lack of structural reform. Starting from 2000, however, the economy was transformed into one of relative macroeconomic stability, high growth, low unemployment and increasing foreign investment, and is currently among the most developed in Southeastern Europe. Economic growth since 2000 has averaged 4-5%, rising to 8.3% in 2004. This has characterized Romania as a boom economy and one of the fastest growing in Europe. Romania was granted in October 2004 the much desired 'functional market economy' status by EU officials, and is expected to join the EU in January 2007. Romania's per-capita GDP, calculated by purchasing power parity is estimated to be $9,446 in 2006. The national budget is €38.1 billion euro (for year 2006), which represents 33.1% of GDP, estimated to be RON 322.5 billion (€90,8 billions) according to the Prime-Minister Tăriceanu. Strong aspects of Romania are the technologically advanced market economy with substantial government participation. Having its own natural resources, Romania has intensively developed its agricultural and industrial sectors over the past 20 years. Romania is largely self-sufficient in food production. Clothing and textiles, industrial machinery, electrical and electronic equipment, metallurgic products, raw materials, cars, military equipment, software, pharmaceuticals, fine chemicals, and agricultural products (fruits, vegetables, and flowers) are leading exports. Romania possesses extensive facilities for oil refining and semiconductor fabrication. Inflation in 2005 dropped to 7.5%. It is expected to fall further to 5.8% at the end of 2006, and 3.8% for 2007. Unemployment in Romania is at 6.2% (May 2006), which is very low compared to other large European countries such as Poland, France, or Germany. Since the late 1990s, there have been several economic reforms, spurred on by the country's bid to join the EU, including the liquidation of large energy-intensive industries and major reforms in the agricultural and financial sectors. As of 2005, a significant amount of Romania's major companies have been privatized, including the majority of banks, the largest oil companies Petrom and Rompetrol, energy distributors and telecommunications companies. The country continues to privatize remaining state enterprises, including Romanian Post and the Romanian Commercial Bank. In comparison to its neighbors, Romania has a high number of small to medium sized enterprises (SMEes). Foreign investment has increased significantly since 2003, reaching € 5.1 billion in 2004. ERSTE BANK A.G. will be the new majority shareholder of Romanian Commercial Bank following the acquisition of a 61.88 percent stake at a price of Euro 7.65 per share, resulting in a total price for the 490,399,321 shares sold of Euro 3,751,554,805 (3.75 Billion €). This is considered the biggest Austrian foreign investment abroad. This is also considered the biggest FDI in Romania. Total FDI in Romania for 2005 was 6.3 Billion €. In the top of investor's country, Austria is leading with more than 6,7 Billion € from 1990 until 2005. For 2006 officials expect foreign direct investments of 10 Billion €. Romania's economy grew 4.1% in 2005, less than half the growth of the previous year, according to the National Statistics Office. The construction sector increased by 9.9% while the service sector showed an increase of 8.1%. Currently GDP growth is forecast at 5.9% per annum. Romania's economy is characterized by a huge potential of tourism. Tourism of Romania has attracted 880 millions € investments in 2005 and doubled the amount of money invested in Romanian resorts. Despite Romania's rapid economic development, poverty is still a pervasive problem, and modernization's effects are only slowly being felt in the country's rural areas. Entrance to the European Union, however, should further speed up the country's development. |
The majority of Romania's trade is oriented towards the countries of the European Union. For the first 3 months of 2006, Romania's exports rose 24.8%, while imports rose 31%, in part due to a rise in real wages. In March 2006, Romanian exports grew to a record value of €3.5 billion/month. The trade deficit was about €1.2 billion (US$1.8 billion) in the first three months of the year, well within the target for 2006. In present, at a series of economical indicators, Romania has a similar situation of the new member states of EU, the export of highly technological products being of 4.5% from total exports, comparatively higher than Poland which has only 2.7% from exports. In December 2005 the National Strategy for Export for 2005-2009 was adopted. Foreign trade is estimated to top 79 Billion € for 2006, compared with 58 Billion € in 2005.
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In January 2005, Romania's new Tăriceanu government imposed major fiscal reforms, replacing Romania's progressive tax system with a 16% flat tax on both personal income and company profit. Romania now has one of the most liberal taxation systems in Europe, and it is expected that this, along with increased foreign investment, will boost economic growth in the coming years, as well as lower corruption and bring to light the gray economy. The tax cuts have led a 12 percent jump in household consumption, which was also boosted by a 15 percent rise in wages. |
Romania's level of international debt is estimated at $24.59 billion in 2004, or 23.6% of GDP which is considered very low. However, as Romania is currently going through an economic boom and is undertaking several major infrastructure projects, especially in the context of its EU accession, debt is expected to rise in absolute terms. During the latter part of the Ceauşescu period, Romania earned significant credits from several Arab countries, notably Iraq, for work related to the oil industry. In August 2005, Romania forgave US$2 billion of the US$2.5 billion debt owed it by an Iraq still largely occupied by the military forces of the U.S.-led "Coalition of the Willing", making Romania the first country outside of the Paris Club of wealthy creditor nations to forgive Iraqi debts. Romania has the largest international reserves in the region, estimated at € 25 billion (by April 2006), covering more than 7 months of imports. |
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The average gross wage per month in Romania is 1217 new lei as of March 2006, an increase of 25,6% over the previous year. This equates to €456.38, based on international exchange rates; the purchasing power parity (PPP) would be about €930. The average net salary per month in March 2006 was 983 new lei (€319.55, about €712 PPP). The Comisia Nationala de Prognoza (CNP) calculates that the average gross wage per month will reach €534 (€962 PPP) in 2007 and €623 (1121€ PPP) in 2009. |
Romania's legal tender is the leu (plural lei). On 1 July 2005, the leu was subjected to revaluation so that 10,000 old lei, in circulation on that date, was exchanged for 1 new leu (RON). The existing banknotes and coins, i.e. the old lei, will be legal tender until the end of December 2006. The official exchange rate for 4 August 2006 for 1€=3.53 lei (National Bank of Romania). By 31 December 2006, the existing banknotes and coins, i.e. the old lei, are to be replaced gradually by the new banknotes and coins. The process will prepare Romania for the adoption of the euro, which is expected to take place several years after EU accession. The Romanian government has said that it expects the country will adopt the euro between 2011 and 2012. Main indicators of Romania's economy: Romania's GDP over 2005-2007 will go up by 10 billion euros per year, and will stand in 2007 at 96.138 billion euros.
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National budget, about €35 billion, represents about 31,2% of GDP of RON 389,5 billion (EURO 94,8 billion), declared the Prime-Minister Tariceanu, 1 Euro=3,4 RON. National budget is increasing rapidly at about 6 billion EURO each year between 2005-2009. About 2 billion EURO/year are spend on national defense. Romania's development in the period from 2007-2013 will cost 58,7 billion euros of which 43% represents European Union financial contribution. |
Romania Information: Inside
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