An Overview of Romania’s Economy
The increase of living standards in Romania has been slowed by the COVID-19 pandemic. Whereas the recovery has been significant, the virus’s resurrection, combined with the low vaccination rate, casts doubt on future growth prospects. Romania’s economy was strong before the pandemic hit. The country managed to cut the gap between its GPD per capita and the OECD average in half in less than two decades, from approximately 70% to around 35%.[1] An important aspect to mention is that the population fearing poverty or social exclusion had reduced to 30% in 2020, from 50% thirteen years before.
The economy is expected to continue growing strongly, but there are significant concerns. The government’s capacity to handle future shocks, as well as the progress of the pandemic, will be crucial in achieving recovery. The vaccine distribution was extremely slow to protect the population against future outbreaks and it must be accelerated.
Monetary policy has been adequately accommodative in 2020, however, inflationary dynamics still need to be actively monitored. Due to increases in energy and food prices, inflation has gone over the top bound of Romania's central bank's target band.
Moving forward, one of the most serious problems facing Romania’s economy is corruption. Corruption is a global phenomenon that crosses country borders and cultural differences. It raises production costs and decreases investment profitability, acting as an inefficient tax on businesses. At the same time, it can reduce investment productivity by lowering the quality of resources. Corruption has expanded and found new forms of expression in Romania over the last 30 years of democracy, slowing the economic, social, technological, and educational progress of the Romanian society and generating distrust in official institutions and business environments.
The Romanian authorities have adjusted the legislation in recent years, adding corruption in the Criminal code, as a result of the rising interest in corruptions, both on global and national level.
If we compare the corruption in Romania with the rest of the countries in the European Union, from 2007 to 2019, we see that it has increased. However, from Figure 1 we observe that in 2019, Romania dropped three points in 2019, positioning itself on the same level as it was in 2012. Figure 1: Corruption in Romania in comparison with the European Union countries, between 2007-2019
Source: adapted by the author from Corruption Perceptions Index (2019) Report
in Romania[2]
In addition, the European Union’s average corruption has remained constant over the years, with small variations.
Corruption remains a major challenge for the entrepreneurial environment. However, Romania, like other countries, is looking for ways to combat corruption through legal reforms.
Edited and Reviewed by Deborah Ikomi
[1] OECD ECONOMIC SURVEYS: ROMANIA 2022
[2] Maria NIȚU, Dorel PARASCHIV, Mihăiță-Andrei GHEORGHE, ‘Corruption and Its Implications in Romania’, Innovative models to revive the global economy, 2020.