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Country Profile Romania 2006

Basic data

Total area

238,391 sq km; twelfth-largest in Europe


21,673,328 (July 1st 2004)

Main towns

Population in '000 (July 1st 2004)

Bucharest (capital): 1,928 Galati: 299

Iasi: 317 Cluj-Napoca: 298

Timisoara: 307 Craiova: 297

Constanta: 307 Brasov: 285



Weather in Bucharest (altitude 92 metres)

Hottest month, July, 16-30°C (average daily minimum and maximum); coldest month, January, minus 7-1°C; driest month, February, 33 mm average rainfall; wettest month, June, 89 mm average rainfall



Weights and measures

Metric system


Leu=100 bani; the plural of leu is lei. The average exchange rate in 2005 was Lei2.91:US$1; Lei3.62:€1. Exchange rate on February 15th 2006: Lei2.96:US$1; Lei3.53:€1


2 hours ahead of GMT

Fiscal year

Calendar year

Public holidays

January 1st-2nd, January 6th, Easter (Orthodox calendar), May 1st, December 1st, December 25th, December 26th


Romania has a coalition government led by the National Liberal Party (NLP) and the Democratic Party (DP), and including the Hungarian Democratic Union in Romania (HDUR) and the Romanian Humanist Party (RHP). The NLP and the DP, which stood together as the Justice and Truth alliance, won fewer votes than the Social Democratic Party (SDP) and its small partner, the RHP, in the November 2004 parliamentary election. However, the victory of the opposition candidate, Traian Basescu, over the SDP's Adrian Nastase in the second round of the presidential election on December 12th 2004 opened the way for the NLP and DP to form the new government. The coalition government has only a small majority and could be vulnerable to defections.

Politics: Political background

The formation of modern Romania

The origin of the modern Romanian state can be traced to the unification in 1859 of the Ottoman principalities of Moldavia and Wallachia. The new state gained formal independence in 1878 and became a kingdom three years later, but included only a part of the Romanian population: some 3m remained in Hungarian-ruled Transylvania, about 2m in Russian-controlled Bessarabia and smaller groups in Dobrudja in Bulgaria. The Romanian kingdom's overriding political goal was the union of all Romanian-inhabited lands into Romania Mare (Greater Romania). This was achieved at the end of the first world war, when the victorious allies sanctioned Romania's acquisition of Transylvania, Bessarabia, northern Bukovina and southern Dobrudja as an anti-Soviet bulwark. Romania more than doubled in size, but failed to integrate fully the new regions or to develop them economically.

The communist era

In 1940 Romania was stripped of most of its 1918 gains by the Soviet Union and by the German-dictated award of northern Transylvania to Hungary. King Carol II abdicated in favour of his son, Michael. Romania joined the German invasion of the Soviet Union in June 1941, but when the Red Army entered Romania in August 1944, King Michael engineered the overthrow of the wartime dictator, Ion Antonescu. The 1947 peace treaty restored Romania's control over northern Transylvania, but awarded Bessarabia and northern Bukovina (now in Moldova and Ukraine, respectively) to the Soviet Union.

The Soviet-backed Romanian Communist Party (RCP) in effect seized power in 1945 and King Michael abdicated on December 30th 1947. Although the party loosened its links with Moscow in the 1950s under the leadership of Gheorghe Gheorghiu-Dej, it adopted all the main features of the Stalinist command economy. From 1965 Gheorghiu-Dej's successor, Nicolae Ceausescu, accumulated enormous personal power, aided by the notorious Securitate secret police. After a failed dash for foreign-financed growth in the 1970s, Ceausescu embarked on a forced repayment of external debt, which imposed severe privation on the majority of the population. By the late 1980s the RCP leadership had degenerated into a nepotistic clan, with key posts held by Ceausescu himself and members and close associates of his family. Despite widespread hardship, organised opposition was limited. In December 1989, following the collapse of communist governments across eastern Europe, public demonstrations culminated in the violent overthrow of the Ceausescu regime, and the execution of Ceausescu and his wife on December 25th.

Politics: Recent political developments

Reform is slow under the neo-communists

The fall of the regime paved the way for a palace coup by a section of the former elite that had fallen out of favour with Ceausescu. Under the umbrella of the National Salvation Front (NSF), the coup leaders quickly reversed some of Ceausescu's most unpopular policies. They reduced working hours, removed curbs on domestic energy consumption and lifted restrictions on the press. This helped the NSF to win a strong mandate at the May 1990 general election. Its candidate, Ion Iliescu, portrayed as a moderating force, won the presidency by a large majority.

The NSF's "social democratic" programme was based on promises of stability, improved social provision and gradual economic reforms that avoided the rigours of rapid price increases and industrial restructuring. An attempt by the prime minister, Petre Roman, to introduce wider-ranging market reforms in 1991 was abandoned after violent demonstrations by miners, who occupied government buildings in the capital, Bucharest. Mr Roman was replaced as prime minister by Theodor Stolojan and left the NSF to form the Democratic Party (DP), a centre-left party with a greater orientation to economic reform.

New electoral alliances emerge after 1992

The Democratic National Salvation Front (DNSF), the dominant faction after the split of the NSF, remained the largest parliamentary party after the general election in September 1992, and Mr Iliescu was re-elected as president in the same year. The DNSF, which was subsequently renamed the Party of Social Democracy in Romania (PSDR), formed a minority government in 1992 headed by a former bureaucrat, Nicolae Vacaroiu. The Vacaroiu government depended on the parliamentary support of ultra-nationalist and neo-communist parties, which reinforced its caution over the pace of economic change. Although a serious attempt at macroeconomic stabilisation was made in 1994, this was reversed by lax economic polices in 1995-96 in the run-up to the 1996 elections. This resulted in the return of inflationary pressures, a devaluation in 1996, and the reinstatement of price and currency controls.

A new centre-right coalition is formed in 1996

The leading centre-right parties created an umbrella organisation, the Democratic Convention (DC), which was dominated by the National Peasant-Christian Democratic Party (NP-CDP). The DC became the main source of parliamentary opposition to the PSDR between 1992 and 1996, and won 30% of the vote in the parliamentary election in November 1996. The DC formed a coalition government led by Victor Ciorbea, with the DP, led by Mr Roman, and the Hungarian Democratic Union in Romania (HDUR), which represents the interests of the Hungarian minority. In the presidential election held at the same time, the DC candidate, Emil Constantinescu, won a second-round run-off against Mr Iliescu by 54% to 46%.

Although the government introduced stricter macroeconomic policies, it failed to restructure obsolete industries. Living standards tumbled in 1997, and Mr Ciorbea was replaced as prime minister by Radu Vasile in April 1998. Mr Vasile had some success in accelerating the privatisation of large-scale industry and banks and closing down loss-making enterprises in the coal and metallurgical sectors. However, output, real incomes and living standards continued to fall in 1998-99, contributing to the growing unpopularity of the government, and culminating in industrial unrest and violence in a number of cities. Mr Vasile was dismissed by Mr Constantinescu in December 1999 and replaced as prime minister by Mugur Isarescu, the governor of the National Bank of Romania (NBR, the central bank). Changes at the top could not, however, stem the loss of support for the government, and the coalition and its constituent parties remained deeply unpopular.

Politics: Important recent events

June 2001

The Party of Social Democracy in Romania (PSDR) is renamed the Social Democratic Party (SDP), following a merger with the Romanian Social Democratic Party (RSDP).

October 2001

The IMF approves a new stand-by agreement with the government in support of an ambitious reform programme.

The Romanian government gives strong support to the US-led "war on terror".

December 2002

The EU confirms that Romania will not be included in the next round of enlargement, scheduled for May 2004, but says it will support the country's efforts to join in 2007, and provides a "road map" outlining measures that must be implemented to qualify for membership.

October 2003

Romania completes a stand-by agreement with the IMF for the first time, following five previous failures.

July 2004

The Romanian government signs a precautionary, two-year stand-by agreement with the IMF.

October 2004

Romania is acknowledged as a "functioning market economy" (FME) by the European Commission in its annual report.

November 2004

The Social Democratic Party (SDP) and its small partner, the Romanian Humanist Party (RHP), win the parliamentary election by a narrow margin, but fail to form a government pending the outcome of the second round of the presidential election.

December 2004

Traian Basescu beats the SDP's Adrian Nastase in the second round of the presidential election on December 12th and invites Calin Popescu Tariceanu to form a government. A coalition government comprising the National Liberal Party (NLP), the Democratic Party (DP), the Hungarian Democratic Union in Romania (HDUR) and the Romanian Humanist Party (RHP) is sworn into office on December 28th. Romania completes accession negotiations with the EU.

April 2005

Romania, together with Bulgaria, signs the EU accession treaty.

October 2005

The IMF criticises the authorities' lax fiscal, wage and monetary policies, declaring that the stand-by agreement is off-track.

The PSDR and Mr Iliescu return to power in 2000

The PSDR was returned as the largest party in the new parliament following the general election in November 2000. The DC failed to cross the threshold for parliamentary representation. Mr Constantinescu had earlier announced that he would not seek re-election as president, and Mr Iliescu was elected as president for a third time in December 2000 after a second-round run-off against Corneliu Vadim Tudor of the ultra-nationalist Greater Romania Party (GRP), which became the second-largest party in the new parliament.

The PSDR, subsequently renamed the Social Democratic Party (SDP) following a merger with the Romanian Social Democratic Party (RSDP) in June 2001, formed a minority government headed by Adrian Nastase. Throughout its four-year term the SDP relied on the support of the HDUR for a parliamentary majority. The small Romanian Humanist Party (RHP), which stood on the PSDR electoral lists in the 2000 election, withdrew from the government in 2003. The SDP enjoyed high levels of public support into 2004, but this began to seep away, as illustrated by the opposition's successes in the June 2004 local elections and thoroughgoing defeats for SDP candidates in Bucharest and Cluj.

The SDP is ousted from power in 2004

The SDP and the RHP (which again stood on the SDP's electoral lists) won the November 28th 2004 parliamentary election by a narrow margin. They won 36.6% of the vote in the Chamber of Deputies (the lower house of parliament) and 37.1% in the Senate (the upper house), compared with 31.3% and 31.8% for the opposition alliance of the National Liberal Party (NLP) and the Democratic Party (DP). However, the surprise victory for Traian Basescu, the opposition candidate, over Adrian Nastase in the second round of the presidential election—in which Mr Basescu overturned a 700,000-vote lead for the SDP leader from the first round—changed all calculations about the shape of the incoming government. Mr Basescu invited the NLP-DP to form a government. On December 21st the NLP, the DP and the HDUR successfully completed negotiations on the formation of a new cabinet. After much prevarication the RHP also decided to join the coalition. A joint session of Romania's bicameral parliament on December 28th approved by a vote of 265 to 200 the new cabinet and its programme as proposed by the prime minister, Calin Popescu Tariceanu.

The NLP/DP coalition has a shaky start

In an unfortunate reminder of the squabbling that racked the previous centre-right coalition in 1996-2000, the four-party coalition comprising the NLP, the DP, the HDUR, and the Conservative Party (CP; formerly the RHP), has been prone to in-fighting and scandal. As a result, the government lacked the unity and focus to push through vital reforms to the public administration and health service in 2005. The two senior government parties were also at loggerheads over the 2006 budget, disagreeing especially about the size of the education budget. The only bright spot has been reforms to the justice system, spearheaded by the Ministry of Justice.

At certain points in 2005 it seemed that the NLP and DP would split, following growing tensions between the president, Mr Basescu (formerly head of the DP), and the prime minister, Mr Tariceanu (leader of the NLP). Mr Basescu was a strong advocate of holding a parliamentary election early, in the second half of 2005, to consolidate the alliance's position. However, Mr Tariceanu opposed this idea, arguing that it would divert parliament from passing the legislation necessary for EU accession. Mr Basescu now makes no attempt to hide his disdain for his prime minister, and Mr Tariceanu resents the fact that the president is constantly intervening in areas of government that are outside his remit.

In addition to personal hostilities, there are fundamental policy differences between the NLP and the DP, particularly on economic policy, where the NLP favours neo-liberal policies with low government spending, whereas and the DP favours a more social democratic approach, which implies higher government spending. There are also deep divisions between the local organisations of the two parties, which, in effect, rules out the possibility of a genuine merger. Under these circumstances, it is difficult to see how the alliance can function as an effective unit right up to the next parliamentary election, due in 2008.

Politics: Constitution, institutions and administration

A bicameral parliament

In a referendum on October 19th 2003, a large majority of Romanian voters accepted a new constitution to replace the first post-communist constitution of December 1991. The new constitution was intended to bring Romanian law into line with EU legislation as part of the push for EU accession. The constitution provides greater safeguards for property rights and provides improved legal safeguards for ethnic minorities. It provides equal opportunities for men and women to occupy senior public positions; abolishes compulsory military service; allows the use of minority languages in public administration and justice; limits parliamentary immunity from prosecution; strengthens the power of the judiciary; and extends the presidential term from four to five years.

Legislative power is vested in a bicameral parliament, comprising a 332-seat Chamber of Deputies (the lower house) and a 137-seat Senate. Members of parliament are elected by universal suffrage, using proportional representation, for four-year terms.

The presidency

The constitution confers considerable power on the president—he appoints the prime minister, who in turn appoints the cabinet. The president is elected for a five-year term by popular suffrage and can serve a maximum of two terms. However, in November 2000 Mr Iliescu, who was president from 1990 to 1996, was elected as president for a third time. The constitutional court ruled that his first term (1990-92) did not count as a full term of office, and this allowed him to seek election in 1996 (when he lost to Emil Constantinescu) and 2000. The former DP leader and mayor of Bucharest, Traian Basescu, succeeded Mr Iliescu after a dramatic victory in the second round of the December 2004 presidential election.

The judiciary

The judicial authority consists of the law courts, the Ministry of Justice and the Higher Council of Magistracy. Romania has made progress in reforming its legal system in recent years, but much still needs to be done to increase the independence of the judiciary. Successive reports by the European Commission have raised serious questions about the political neutrality of the judiciary, the low level of training and qualifications of personnel in the judicial system, and their lack of familiarity with EU law. The Commission has also expressed its doubts about Romania's capability to enforce critical sections of the acquis communautaire (the body of EU law), including those relating to border controls, drugs control, the fight against organised crime and corruption, money-laundering, trafficking in human beings and the implementation of EU visa policy. The politically independent justice minister, Monica Macovei, appointed by the NLP/DP government, is trying to shake up the judiciary and accelerate reform.

Inter-ethnic relations and minority rights

The EU has in the past expressed concern about human rights and the treatment of minorities in Romania. It has been particularly concerned about the protection of children in orphanages; discrimination against the Roma; the lack of adequate provision for those with physical and mental disabilities; the inadequacies of the penal system and lack of accountability of the police; and limitations on the free operation of the media. In recent years, however, governments have made progress in improving civil and political rights. Reform of the childcare system has been substantive; homosexuality has been decriminalised; land restitution is almost complete; the introduction of probation represents an important reform of the penal system; and several initiatives have been taken to prevent the trafficking of human beings. The 2001-04 SDP government granted important concessions to minorities. These included extending the use of minority languages—including in public administration and justice—and agreeing to the creation of a private Hungarian university, financed by the Hungarian state. A strategy aimed at addressing discrimination against the Roma minority is being implemented, but discrimination remains widespread. The legal situation of journalists has improved, but further efforts are required to guarantee media independence.

Politics: Political forces

A fragmented political scene

The political elite is made up of left-wing and centre-left parties that have their origins in the post-war communist party; the traditional, predominantly right-wing and centre-right, inter-war parties; the nationalist parties; and a party that represents the Hungarian minority. No single political grouping has been able to win enough support to form a majority government on its own, and the 2004 election continued this pattern. The formation of stable governing coalitions has been complicated by personal animosities that run through the political scene. Most parties have deep internal divisions, resulting in constant political realignments.

Parliamentary forces
(results of Nov 2004 election)
  % of votea % of seats Seats
Chamber of Deputies      
Social Democratic Party (SDP)b 31.7 34.3 114
Justice and Truth alliance (DA) 31.3 33.7 112
Greater Romania Party (GRP) 12.9 14.5 48
Hungarian Democratic Union in Romania (HDUR) 6.2 6.6 22
Romanian Humanist Party (RHP) 4.9 5.4 18
Others incl minoritiesc 13.0 5.4 18
Total 100.0 100.0 332
Social Democratic Party (SDP)b 26.2 33.6 46
Justice and Truth alliance (DA) 31.8 35.8 49
Greater Romania Party (GRP) 13.6 15.3 21
Hungarian Democratic Union in Romania (HDUR) 6.2 7.3 10
Romanian Humanist Party (RHP) 10.9 8.0 11
Others 11.3 0.0 0
Total 100.0 100.0 137
a Refers to percentage of the popular vote, which translated into a higher percentage share of parliamentary seats after the redistribution of votes won by parties that did not achieve the minimum threshold for parliamentary representation. b The SDP included on its lists the RHP, but we have separated out their percentage share of the vote and number of seats as the RHP subsequently reneged on its alliance with the SDP and joined the government. c According to electoral law, national minority organisations, other than the HDUR, receive one seat each in the Chamber of Deputies. There are 18 seats reserved for minorities in this legislature.
Sources: Central Electoral Bureau; Economist Intelligence Unit calculations.

Download the numbers in Excel

The return of the centre-right

The National Liberal Party (NLP) emerged as the leading centre-right party following the demise of the 1997-2000 Democratic Convention (DC) government, which had been dominated by the National Peasant-Christian Democratic Party (NP-CDP; the Christian-Democratic right has since fragmented). In September 2003 the NLP and the centre-left Democratic Party (DP) formed an alliance to contest the 2004 elections. The DP had been struggling to regain popular support under the leadership of Traian Basescu, the popular mayor of Bucharest, who took over from Petre Roman at the party congress in May 2001. The NLP-DP bloc registered itself as a political alliance, Justice and Truth, in January 2004, and went on to perform well in the 2004 local and parliamentary elections. In the November 2004 general election the NLP-DP alliance won 31.3% of the vote in the lower house and 31.8% in the upper house, in marked contrast to the combined vote garnered by the two parties in 2000, when they won 14.5% in the lower house and 15.1% in the upper house. The NLP and the DP are not natural allies in ideological or programmatic terms, with the former belonging to the centre-right and the latter to the centre-left. Hence the two parties long delayed the formation of an electoral alliance, and there is continuing opposition within both to a merger. The potential for conflict between the NLP and the DP was amply demonstrated during their first year in office in 2005, when economic policy in particular became the focus of dispute on several occasions.

The HDUR as kingmaker

The Hungarian Democratic Union in Romania (HDUR) represents the interests of more than 1.6m ethnic Hungarians, who are largely concentrated in the Transylvania region. The party is something of a natural ally for the NLP, sharing its centre-right economic programme. However, the HDUR's previous experience in government with the NLP and the DP, in the quarrelsome 1997-2000 coalition, was not positive. In particular, the HDUR had problems in winning support from nationalist-leaning DP deputies for concessions on ethnic minority rights. So disenchanted were some in the HDUR leadership with the experience that they vowed never again to go into government with either party. As it turned out, the lure of government office proved too compelling, but tensions between the HDUR and other government parties are evident—for example, over the draft law on minority status and over the issue of appointments of county prefects.

The CP: a shrinking party

The tiny Conservative Party (formerly the Romanian Humanist Party) is the greatest anomaly in the government coalition. It is left-leaning and has been a long-standing ally of the Social Democratic Party (SDP), with which it stood on the same electoral lists in both the 2000 and 2004 elections. However, the party's leader, Dan Voiculescu, has shown himself to be a consummate opportunist, reneging on the RHP's alliance with the SDP after being offered several cabinet posts by the NLP prime minister, Mr Tariceanu. The president, Mr Basescu, argued in 2005 that an early election was necessary to rid the government of the "immoral solution" of relying for a majority on the support of the RHP. Popular support for the RHP plummeted in 2005, and unless it again stands on the SDP party lists in the 2008 election it will not meet the voting threshold for representation in parliament.

The SDP returns to opposition

In their various incarnations—as the National Salvation Front (NSF), the Democratic National Salvation Front (DNSF), the Party of Social Democracy in Romania (PSDR) and the Social Democratic Party (SDP)—the former communists who now make up the SDP have dominated politics at national and local level since 1989. They were in power between 1989 and 1996, when they were defeated by the DC, and in 2001-04, before being edged out of office by the NLP-DP. Although the SDP is composed largely of former communists, and its support is strongest among older voters and rural workers, its policies have moved towards the social democratic centre in recent years. Nevertheless, the SDP remains something of a prisoner of the past. It won the 2004 election, narrowly, by mobilising its traditional constituency and did not succeed in broadening its appeal to a younger, urban and more middle-class electorate whose social weight and political influence is growing.

Demoralised following its failure to form a government after the 2004 election, the SDP is going through a period of reorganisation. A party congress soon after the elections resulted in the removal of party founder, Ion Iliescu, from the leadership and the appointment of the former foreign minister, Mircea Geoana, as party leader. Tainted by allegations of corruption, including against its leaders, the party may find it difficult to regain popular trust. If the party were to split, with Mr Geoana, ditching the old guard and leading the reformist wing further towards the centre, the SDP could end up as a fairly small, insignificant party without a clear support base.

Nationalists are no longer a potent force

The ultra-nationalist GRP won 20% of the popular vote and became the second-largest party in both chambers of parliament in the 2000 election, benefiting from the electorate's disenchantment with both left and right of the political divide. The GRP traditionally advocated anti-Hungarian and anti-Semitic policies, the return of former Romanian territories and the renationalisation of industry. The GRP's flamboyant leader, Corneliu Vadim Tudor, also forced Mr Iliescu into a second-round run-off for the presidency in 2000, after winning a stunning 28% of the vote in the first round. With support for his party falling, Mr Tudor tried in 2004 to tone down his ultra-nationalist image in a bid to bring the party into the mainstream of Romanian politics. He apologised to people targeted by his "verbal excesses" and for pamphlets criticising Jews. The GRP's share of the vote for the lower and upper houses of parliament fell from 19.5% and 21%, respectively, in 2000, to 12.9% and 13.6% in 2004. The party was thus the main loser in the 2004 election. For a time the GRP became the Greater Romania People's Party and was headed by Corneliu Ciontu, Mr Tudor's former right-hand man, following Mr Tudor's resignation. However, the conversion did not last long and Mr Tudor has since reclaimed the party leadership, restored the organisation's original name and revived its traditional nationalist agenda. Over the course of 2005, support for the GRP rose from 8% to 16% in the opinion polls. It remains to be seen, however, whether the party's reinvigoration will last.

Politics: Main political figures

Traian Basescu

The 54-year-old Mr Basescu was the surprise winner of the December 2004 presidential contest, coming from 700,000 votes behind to defeat Adrian Nastase of the Social Democratic Party (SDP). In the second round Mr Basescu was formerly the leader of the Democratic Party (DP), having defeated Petre Roman for the leadership in May 2001. Although a former communist, he was never a party apparatchik, making a career at sea as commander of the biggest ship in the Romanian fleet. He served as transport minister in the 1997-2000 coalition government led by the Democratic Convention (DC) and was elected mayor of Bucharest in 2000, a post to which he was re-elected in June 2004. As mayor he improved the capital's image among foreign investors as well as locals, enhancing his own political standing in the process. Following the formation of the alliance between the DP and the National Liberal Party (NLP) in 2003, Mr Basescu was regarded as a possible candidate for prime minister, but indicated his intention to stand for a second term as mayor of Bucharest. After the withdrawal of Theodor Stolojan as the opposition's presidential candidate, Mr Basescu stepped into the breach. Mr Basescu has set out to play a hands-on, interventionist role as president, boosting his popularity, but damaging relations with the prime minister in the process.

Calin Popescu Tariceanu

Mr Tariceanu is prime minister and leader of the NLP, the party he helped to found in 1990. In his fifties, Mr Tariceanu was appointed interim president of the NLP in October 2004, having served as party vice-president since 1993, and was confirmed as its president in early February 2005. Mr Tariceanu served as minister of industry and commerce in 1996-97, during which time he presided over the reorganisation of the oil sector and the establishment of the national oil company, Petrom, as well as the restructuring of the mining industry. He was asked by Mr Basescu to form a government in December 2004, but relations between the two men quickly deteriorated in 2005, especially after Mr Tariceanu opposed Mr Basescu's plan for an early election and refused to resign.

Ion Iliescu

Mr Iliescu, now in his mid-70s, is a political survivor who has not lost his populist touch. Mr Iliescu was initially hailed as the insider who ended the Ceausescu dictatorship, and was elected president by a wide margin in 1990 and 1992, but he was subsequently associated with a subsidy-driven boom that masked a lack of enterprise reform. He was defeated by Emil Constantinescu in the presidential election of 1996, but staged a come-back in 2000. His third term came to an end in 2004. Following the SDP's failure to form a government after the 2004 elections, Mr Iliescu was ousted from the party leadership. Nevertheless, he shows no signs of leaving the political fray, and continues to play a prominent role in the SDP.

Mircea Geoana

Mr Geoana became leader of the SDP in April 2005 after beating the former president, Mr Iliescu, in the election for party chairman. Mr Geoana represents the modernising wing of the party, but, as a relative newcomer, he does not have the authority as his predecessor. He was foreign minister in the 2001-04 SDP government, and was largely responsible for negotiations with the EU and NATO. He suffered a setback when he was beaten by Mr Basescu in the Bucharest mayoral elections in 2004, but went on to become the SDP nominee for prime minister in the 2004 parliamentary elections. Following the party's failure to form a government, Mr Geoana has struggled to assert his leadership of the SDP, which is lacking a clear identity and whose image has been badly tarnished by corruption scandals.

Corneliu Vadim Tudor

Mr Tudor is the leader of the nationalist Greater Romania Party (GRP), which has traditionally advocated anti-Hungarian, anti-Roma and anti-Semitic policies, the return of former Romanian territories in Moldova and Ukraine, the renationalisation of industry and a war against corruption. During 2000-04 Mr Tudor toned down his anti-minority and anti-Western rhetoric, and emphasised the priority that his party was giving to the fight against corruption. However, his renunciation of anti-Semitism angered his own members, but failed to convince anybody else, and in 2005 Mr Tudor returned to his traditional political agenda.

Politics: International relations and defence

Regional relations

Romania's major foreign policy initiatives in recent years have been directed towards obtaining membership of the EU and NATO. This has had a positive impact on its dealings with neighbouring states, as good regional relations are a condition of membership of both organisations. There has been an improvement in Romanian-Hungarian relations since the mid-1990s, and this is expected to continue. Romania's relations with Bulgaria have occasionally been testy, with Bulgaria expressing concern that Romania may delay its own EU membership prospects. Relations with neighbouring Serbia and Montenegro have traditionally been good.

Reunification with Moldova, which was annexed from Romania by the Soviet Union in 1940 and which has a population that is 60% ethnic Romanian, remains an ambition of Romania's elite. Mr Basescu has reaffirmed his commitment to the "one nation, two states" policy launched in 2005, but has also expressed the hope that the reunification of the two countries can take place once both are members of the EU. Relations between Romania and Ukraine have improved with the election of a new president in each country, Mr Basescu and Victor Yuschenko, in 2004 and 2005, respectively. However, there are still outstanding disputes, including over the division of borders in the mouth of the Danube, which have implications for drilling rights in the Black Sea. Romania signed a long-awaited bilateral treaty with Russia in 2003, but relations have been strained by Romania's membership of NATO and its decision in 2005 to allow the US to establish a permanent military presence on its soil.

NATO membership

The 2001-04 SDP government made integration into Euro-Atlantic alliances its major foreign policy objective, and met with considerable success. NATO invited Romania to open membership discussions at its summit meeting in Prague in November 2002. Discussions opened in December 2002 and led to the signing of a protocol of membership in May 2003. Romania's membership of NATO was finalised on March 29th 2004.

EU membership

Romania's main foreign policy goal now is to join the EU in January 2007, a target date that was endorsed at the EU summit meeting in December 2004. Romania completed EU accession negotiations at the end of 2004 and signed an accession treaty, together with Bulgaria, in April 2005. The main risk to achieving accession in 2007 arises from delays in implementing the acquis communautaire (the body of EU law). The accession treaty contains a "safeguard clause" allowing the European Council to decide, based on a Commission recommendation, to postpone accession by one year, until 2008, if there is strong evidence that Romania would be unprepared to meet the requirements of membership by January 2007. A fact-finding mission will visit Romania in April 2006 and the Commission will publish its monitoring report in May. At this time, it will decide on whether to recommend membership in January 2007 or in 2008. There are no provisions in the accession treaty to postpone membership beyond 2008. In a worst-case scenario, however, accession could be delayed indefinitely if a member state should fail to ratify the accession treaty. This would be unprecedented, and would provoke a deep crisis in the EU, and The Economist Intelligence Unit considers it is unlikely to happen.

Politics: EU membership

Political obstacles

The European Commission published its annual report on Romania's progress towards EU accession on October 25th 2005. The report will play a crucial role in shaping the attitudes of all bodies that are required to monitor Romania's ability to meet the accession criteria and to ratify Romania's accession in January 2007.

The report noted that Romania had made some improvements in political and social reforms in the year to the end of September 2005, including progress in such areas as the independence of the judiciary, media freedom, legislation on property restitution, the situation of minorities and child protection. However, it noted that further efforts were required in the following areas.

  • The reform of the public administration and the professionalisation of the civil service. This includes implementing changes to ensure that the civil service is capable of enforcing EU legislation and disbursing EU structural funds. The report noted that political advisers, rather than civil servants, were largely responsible for developing and drafting legislation. It said that advisers frequently took insufficient account of the economic implications of new legislation and the ability of the appropriate agencies to enforce it, and that excessive recourse was still made to emergency orders, bypassing parliamentary scrutiny.
  • The fight against corruption. The report stressed that the fight against corruption should be a priority—in particular, at high levels in the government and public administration, as well as within law-enforcement bodies. The report observed that national and international surveys confirmed that corruption remains serious and widespread, and that the success of anti-corruption efforts to date had been limited, with no significant reduction in perceived levels of corruption. The number of prosecutions remained low, particularly for those in high-level positions.
  • Guarantees of human rights and the protection of minorities. The report emphasised that further efforts were required to combat ill treatment of prisoners in custody; strengthen the capacity of the appropriate bodies to prevent trafficking in human beings; improve the situation of the disabled and the mentally ill; and ensure the effective integration of the Roma minority into society as a whole.

The report stressed that continued progress at current rates would not be sufficient to meet the accession criteria and that significant improvements would be required in all these areas to ensure Romania's accession to the EU in January 2007.


As of August 2005 Romania's active armed forces totalled 97,200, including 66,000 members of the army, 14,000 in the air force, 7,200 naval personnel and 10,000 in centrally controlled units. These are supported by 104,000 reservists. In addition, there are 79,900 paramilitary personnel attached to the Ministry of Interior. The number of conscripts was 29,600 in 2005, but this is being reduced as Romania prepares for greater professionalisation of the army. Romania has international peacekeeping troops in Iraq, Afghanistan, Bosnia and Hercegovina (BiH), and Kosovo. It has UN observers in various war-torn African countries (Burundi, Cote d'Ivoire, Democratic Republic of Congo, Ethiopia/Eritrea, Liberia, Sudan) and in Georgia.

Defence expenditure fell sharply in the 1990s, but has been growing as a percentage of GDP since 2000, reaching US$1.51bn, or 2.1% of GDP, in 2004, above the unofficial minimum NATO requirement of 2% of GDP. More than half of Romania's military hardware is at least two decades old and the task of modernisation is daunting. A rapid upgrade to Western standards is beyond the country's means.

Military forces, 2005
Active forces  
Army 66,000
Air force 14,000
Navy 7,200
Total incl paramilitary 177,100
 Conscripts 29,600
Total reserves 104,000
Source: International Institute for Strategic Studies, The Military Balance, 2005-06

Download the numbers in Excel

Romania is reforming its army structure in line with its NATO commitments. The changes are intended to create a more efficient army structure at lower cost by concentrating resources on smaller, better-trained units. Known as "Objective Force 2007", the proposals envisage the strengthening of active and territorial forces and the abolition of reserve forces. The active force will form the nucleus of the armed forces and will be equipped to meet international commitments using NATO standard procedures. The territorial force will have a lower standard of equipment and will in effect replace reserve forces, resulting in the gradual elimination of compulsory national service. The number of army personnel will be cut to 90,000 by 2007, of which 15,000 will be civilians.

Politics: Security risk in Romania

Armed conflict

There is a minimal risk of armed conflict within the country and a low risk of armed conflict beyond its borders. Since 1989 Romania has not been troubled by any issue with its neighbours—Hungary, Ukraine, Moldova, Bulgaria, and Serbia and Montenegro—that has threatened armed conflict, although war in the neighbouring former Yugoslavia in 1991-99 had a negative impact on Western trade and investment in Romania. The outlook for peace and stability in the Balkans has improved greatly since the removal of Slobodan Milosevic in Serbia in October 2000. However, the unresolved status of the UN protectorate of Kosovo in southern Serbia and the uncertain future of the common state of Serbia and Montenegro mean that regional security risk remains high. Relations with Hungary have often been difficult because of the existence of a large ethnic Hungarian minority in Transylvania (control of the region was given to Romania under the Treaty of Trianon in 1920). However, there has been a marked improvement in Romanian-Hungarian relations since the mid-1990s, and Hungary has supported Romania's application to join the EU.


There is no internal terrorist threat in Romania and there have been no incidents in Romania involving politically motivated damage to foreign investment projects or installations. Speculation that Romania has been used as a base for international terrorism appears largely unfounded, but there is some evidence that individuals or groups connected with international terrorist organisations have operated in the country. In co-operation with foreign intelligence services, the Romanian Intelligence Services (SRI) investigated foreigners suspected of involvement in preparations for the September 11th 2001 attacks on the US, and recommended the expulsion of several persons suspected of links with terrorist organisations. Romania was among the 13 countries mentioned by Osama bin Laden in a 1996 interview as being host to his support groups.

The Romanian authorities have also co-operated with the US Federal Bureau of Investigation (FBI) and Interpol in investigating Arab-owned businesses in the country suspected of having links to terrorist groups and providing funding for them. The SRI subsequently confirmed that large sums of money had been transferred from Romania to accounts at banks abroad with possible links to terrorist organisations. In November 2001 the National Bank of Romania (NBR, the central bank) issued an emergency ordinance forbidding the transfer of money to foreign accounts suspected of links with international terrorist organisations. Romania's response to the post-September 11th US appeal for a co-ordinated international campaign against terrorism has been forthright, and the government claims to provide an important platform in the US-led "war on terror", especially in containing threats to NATO's southern flank.

Civil unrest

Romania has a history of civil and social unrest. With the exception of the former Yugoslavia, Romania was the only other country in the eastern bloc where the collapse of communism was accompanied by violence, with large-scale demonstrations culminating in the overthrow of the regime of Nicolae Ceausescu and the execution of Ceausescu and his wife on December 25th 1989. Other examples of violent civil unrest include the inter-ethnic conflict in Tirgu Mures, Transylvania, in 1990; violent demonstrations in the capital by miners, which toppled the coalition government led by Petre Roman in 1991; and violent protests by miners from the Jiu Valley against pit closures and redundancies in 1999-2000.


The incidence of crime against both persons and property is low by international standards and has been falling in recent years. The crimes per 100,000 inhabitants is less than 1,500 per year, and the number of convictions per 100,000 population was 320 in 2004. The incidence of crimes against the person has fallen in recent years to about 18,000 in 2004, while crimes against private property have declined dramatically since the mid-1990s, to about 30,000. Violent crime against the person, including murder, manslaughter, grievous bodily harm and rape, represents less than one-fifth of the total. Although the overall crime rate is reassuringly low, petty crime can be an irritant for foreigners. The risk of petty theft in large cities, especially Bucharest, is high and foreigners are always targets. Cybercrime is a growing problem for business, especially Internet credit card fraud, perpetrated by sophisticated Romanian hackers.

Drug smuggling and organised crime

Compared with other countries in the Balkans, Romania has relatively little serious organised crime. In so far as it exists, its effects are limited to areas, such as prostitution, or trafficking in humans and drugs, that generally do not affect the activities of normal private businesses. Money-laundering has become more of a problem. A National Office for the Prevention and Control of Money-laundering is now functioning, and investigation and enforcement operations have commenced.

Resources and infrastructure: Population

The population has been declining since 1990

Romania's population has fallen every year since 1990, owing to declining birth rates, increasing mortality rates and emigration. Data from the latest census, held in March 2002, indicate that the population declined by 4.9% between 1992 and 2002, to 21.7m, a far sharper fall than had been indicated by official population estimates between the censuses. Females accounted for 51.2% of the population, compared with 50.8% at the 1992 census. The urban population constituted 52.7% of the population in 2002, compared with 54.3% in 1992. At mid-year 2004, the population was 21,673,328.

The fertility rate has fallen significantly as a result of the increased availability of contraception and in response to the precipitate decline in household living standards during the transition. The birth rate fell from 13.6 per 1,000 inhabitants in 1990 to 10.0 per 1,000 in 2004, although 2004 was the first year since 1989 in which the birth rate increased. Death rates for all age groups over 35 rose between 1990 and 1997, resulting in an increase in the overall death rate from 10.6 per 1,000 inhabitants in 1990 to a peak of 12.7 in 1996. The death rate fell to 11.9 per 1,000 inhabitants in 2004.

Apart from natural decrease, emigration has been a significant cause of population decline. One of the unofficial explanations for the decrease in Romania's population by 1m between the latest two censuses is the non-registration of Romanians working abroad illegally. In April 2003 more than 900,000 Romanians were estimated to be working abroad legally or illegally, according to data from a survey conducted by the Centre for Urban and Regional Sociology (CURS) in Bucharest, the capital. Some 12% of Romanian households had at least one member working abroad and sending money to their family. The CURS estimate is much lower than that given by the International Organisation for Migration in 2003, which estimated that 1.8m Romanians (10% of the adult population) were working abroad. More than 70% are estimated to be working legally. Emigration began in 1990 and was at first directed towards Poland and Yugoslavia; subsequently Germany, Italy, Spain and Israel became favoured destinations.

Ethnic minorities

According to the 2002 census, 19m citizens recorded themselves as ethnic Romanians, making up 89.5% of the country's population. Ethnic Hungarians fell from 7.1% of the population in 1992 to 6.6% in 2002, but remain the largest minority group. There are another 13 minorities, including Roma, who in 2002 were officially recorded as 535,250, or 2.5% of the population, compared with 1.8% in 1992. However, some estimates put the Roma population as high as 2m, which would make it the largest minority group. Emigration by Germans (who now constitute 0.5% of the population) and Hungarians was particularly high in the early 1990s, but has subsequently stabilised. No other ethnic group accounts for more than 0.3% of the population.

An ageing population structure

Romania's population is relatively young compared with countries in western Europe, with a median age of 34.6 in 2000. In 2004 the 15-59 age group comprised 14m people, or 64.5% of the total population. However, changes in the birth rate have affected the age structure of the population. The proportion of the population aged below 14 fell from 23.6% in 1990 to 16.1% in 2004. The number of people over 60 rose by 600,000 (from 3.6m to 4.2m) between 1990 and 2004. The increase in the old-age dependency ratio (of retired people to working-age population) is the most striking change in Romania's population structure in the past decade, and this trend is set to become more pronounced as a result of the falling birth rate. This will put further strain on the funding of pensions, social security and medical systems, which has been aggravated by early retirement rates. The financial impact of an ageing population will be softened slightly by growth in the working-age population.

Labour force

The collapse of the communist economic system has resulted in significant changes in the size and composition of the labour force. Although the working-age population increased between 1989 and 2000, total employment fell by more than 2.2m, to 8.6m at the end of 2000. The labour force participation rate (working-age labour force as a proportion of the population of working age) fell from 80% in the early 1990s to around 60% in the early 2000s. The largest job losses have been in industry, where employment fell from 4,169,000 in 1989 to 2,004,000 in 2000, with the greatest redundancies being seen in large enterprises. Because of revised definitions and coverage, following reweighting after the 2002 census, data from 2002 onwards are not comparable with those from previous years. According to the new data, total employment has remained at much the same level in recent years, at 9.2m in 2002. Employment in the agricultural sector has fallen, while that in industry has grown. Employment in the construction sector, which has been experiencing a boom in recent years, has also increased, as has employment in hotels and restaurants, trade, real estate and other services.

Unemployment peaked in 1999, reaching 11.8% in December of that year, and has declined steadily since then. It continued to fall in 2005, to 523,000 or 5.9% of the labour force in December. The trend in unemployment has been steadily downwards, despite lay-offs and closures in large, loss-making state-owned enterprises, as the creation of new enterprises and the expansion of private-sector activity have helped to absorb some of the displaced labour. Romania still has a low rate of unemployment compared with other transition economies, which can be attributed partly to the relatively slow rate of reform and restructuring. In addition, many displaced workers return to the countryside, where there is significant overemployment and hidden unemployment. There has also been an increase in the number of people of working age seeking employment abroad and remitting earnings to their families at home.

Clear regional patterns of unemployment have emerged. High rates of persistent long-term unemployment are recorded in counties affected by factory closures and restructuring, whereas unemployment is falling in counties with low rates of pre-existing unemployment, particularly in the Hungarian border regions. For example, unemployment rates in Brasov (home to the now defunct Brasov lorry plant), Hunedoara (one of the centres of the iron industry) and Vaslui (which borders Moldova) have been consistently high, at 10-13%. However, there were indications in 2005 that registered unemployment rates in the worst-affected areas had dropped by 1-2 percentage points. At the other end of the spectrum, unemployment in Satu Mare and Bihor, both on the Hungarian border, is less than 2%, and in Timis—which has borders both Hungary, and Serbia and Montenegro—it is below 3%. Unemployment in the municipality of Bucharest is also low, at less than 3%. Unemployment will start to rise as the government is forced to end subsidies to high-employment industries, particularly in metallurgy and engineering, in preparation for EU membership.

Resources and infrastructure: Education

Educational provision is low by Western standards

Educational attainment levels in Romania are similar to those of other countries in the region. Some 14% of the population has a higher educational qualification; 21% graduated from secondary school; 11% graduated from elementary school and 1.3% did not graduate from any school.

Enrolment of the school-age populations fell drastically in 1990-93, but began to pick up after that, and in 1997 surpassed the level of 1990. In 2004/05 the enrolment rate for the school-age population was 74.9%. The main enrolment problem is in secondary education: in 1990 the gross enrolment rate was 91%; by 1993 it had dropped to 63.7%, before increasing to around 70% more recently. For economic and other reasons the drop-out rate is extremely high: 25% of pupils leave the system after eight years of education. This problem is concentrated in poorer areas and affects particularly the Roma population. Levels of attendance and the quality of educational provision in rural areas, where there are high numbers of unqualified teaching staff, are markedly inferior to those in urban areas. The education of children of migrant workers also poses problems.

There has, however, been a huge increase in enrolment rates in college-level institutions. In the academic year 1999/2000, the number of students was 453,000; by 2004/05 the number had risen to 650,000. About 24% of these students are in private education. The National Agency for Employment and Vocational Training was created in July 1998 to promote vocational education in order to satisfy the changing demands of the labour market as part of an EU Phare-funded programme. The programme has encountered severe problems of implementation, resulting from a lack of trained personnel and the absence of co-operating institutions with the appropriate skills. The number of students pursuing vocational or apprenticeship training has, however, risen from 252,000 in 2001/02 to 289,000 in 2004/05.

Public expenditure on education rose to 4% of GDP in 2000, after averaging 3.5% of GDP per year in the 1990s, but it has remained low by European standards. The resignation in 2005 of the education minister, Mircea Miclea, in protest at the underfunding of education precipitated a strike by 40,000 teachers in November 2005. The intervention of the president, Traian Basescu, in support of the strikers' demand for educational spending to be raised to 5% of GDP in the 2006 budget forced concessions from the government. With teaching salaries in Romania among the lowest in Europe—at less than €100 (US$125) per month for new teachers—the unions also demanded salary rises, as well as better facilities and working conditions. The government eventually signed an agreement with the unions, pledging to find an additional 1.1% of GDP in the 2006 budget for capital outlays on education, bringing total education spending up to 5% of GDP. The government also promised a pay rise of 11.83%, to be implemented in two stages, in January and then in September 2006.

There have been sweeping changes in the structure of the education system in recent years. Most progress has been made in reform of educational and professional training; increasing institutional capacity; modernisation of curriculums; evaluation and certification; and international recognition of diplomas and certificates. The number of teaching staff in higher education has doubled during the transition, but resources have failed to keep pace with demand, so that expenditure per student has halved. This has affected the provision of equipment, including of information technology (IT). Unless concerns about underfunding and low pay are addressed, the crisis in education could deepen in coming years. There are already recruitment shortfalls in certain subjects and few graduates are entering the profession. In many instances, qualified teachers are turning to private educational institutions, or leaving the profession altogether in search of better pay and better working conditions.

Resources and infrastructure: Health

Life expectancy is low

Romania has a low level of life expectancy, even by the standards of the region, of 71.4 years in 2002-04 (67.7 years for males and 75.1 for females; compared with 66.6 and 73.1, respectively, in 1990). Over the past three decades life expectancy for males in Romania has remained at roughly the same level, whereas it has increased by 5.5 years in the EU.

The infant mortality rate has declined significantly from 26.9 deaths per 1,000 live births in 1989 to 16.8 per 1,000 in 2004, but it is still more than double that in Poland, Hungary and Slovakia. The maternal mortality rate fell from 83.6 per 100,000 live births in 1990 to 41.8 per 100,000 in 1999, reflecting the liberalisation of abortion. However, it remains at a very high level (six times that of Poland or Hungary). Although the main causes of death are similar to those in industrialised societies, including cardiovascular disease and cancer, communicable diseases such as tuberculosis remain common. The incidence rates of viral hepatitis and syphilis are higher than for other central European countries.

Slow reform of the system

Romania's healthcare system is almost entirely owned by the state and is funded by a combination of employer and employee contributions to the National Healthcare Insurance Fund (CNAS) and direct allocations from the state budget. Health reforms began in the mid-1990s, but there is still little competition in the provision of health services. Reforms encouraged the development of primary care, introduced an insurance-based system of financing, and separated the purchasing and provision of healthcare. In 1998 Romania adopted a mandatory insurance-based financing model for healthcare, involving employer and employee contributions. The contributions of non-wage earners are paid by the state out of general taxation. The main health fund is the CNAS. Other funds exist for employees of the Ministry of Transport and those involved in national security. The health funds collect contributions and contract with healthcare providers, both public and private. In theory, insurance coverage is comprehensive. Exclusions include certain dental services and high-technology treatments. Capital investments continue to be funded through taxation and paid out of the state budget.

Under healthcare reforms, family doctors have moved from being state employees to being independent practitioners, contracted by the health-insurance funds. Since 1998 citizens have been able to choose a family doctor. Romania has a doctor-to-patient ratio of 1.9 per 1,000 population, which is low. Almost all hospitals are publicly owned. Romania has 7.4 hospital beds per 1,000 population, a relatively large number that imposes extra costs on the health system. The quality of hospital buildings and equipment is poor and deteriorating.

Out-of-pocket spending on healthcare is high in Romania, at about 36% of total healthcare spending, in part reflecting underfunding of the public health system. Some of this takes the form of under-the-table payments to healthcare staff to gain preferential access to treatment. Private health insurance is sometimes offered by foreign or joint-venture companies to their employees. A law on private health insurance was passed by parliament in 2004, which should encourage the development of this market, both among individuals and companies. There is a small but growing private healthcare sector, including several private clinics.

Since 1990 public expenditure on health has been below average, even for the east European region. This has had a negative impact on the maintenance of the health system, investment in new equipment and access to services, especially for low-income groups. According to data from the World Health Organisation (WHO), total health expenditure in 2003 was equivalent to 4.6% of GDP, among the lowest in the central and east European region. Although higher than in Bulgaria (where spending was 4.1% of GDP in 2003), it compares poorly with Hungary (6.9%), the Czech Republic (7.1%) and Slovakia (7.3%). Average health expenditure in the EU is 8.5% of GDP. Government spending accounts for about 65% of total expenditure on health, which is on the low side for a European country, east or west.

Resources and infrastructure: Natural resources and the environment

Romania is a medium-sized country, with an area of 238,391 sq km (slightly smaller than the UK). Mountains, hills and plains each cover about one-third of the total area. Forests (including some in their primal state) cover more than one-quarter of the area, and the fauna is among the most varied in Europe. Some 62% of the land is classed as agricultural, but only 39.2% of it is farmed. Natural conditions favour the cultivation of a range of crops, including cereals, industrial crops, vines and vegetables. The climate is continental, with mean temperatures of -3°C in the winter and 22-24°C in the summer.

Environmental record is criticised by the EU

Romania's environmental record has been poor even by regional standards, and its reputation has deteriorated following incidents that have resulted in crossborder contamination. The European Commission's annual reports have repeatedly criticised the government for giving insufficient priority to environmental protection, resulting in high levels of air pollution and weaknesses in water and waste management. Heavy investment in pollution prevention will be required if Romania is to approach west European standards of environmental protection.

Resources and infrastructure: Transport, communications and the Internet

Road and rail

Public investment in essential transport infrastructure took second place to investment in large-scale prestige projects in the 1970s and 1980s, with the result that road and rail networks are among the least extensive in Europe. Their state of disrepair constitutes a major obstacle to economic development.

Romania's road infrastructure lags behind that of western Balkan states such as Croatia, or Serbia and Montenegro; this hampers Romania's access to EU markets and may also make the country less attractive to foreign investors. Romania’s public road network covers 78,000 km, comprising national roads stretching 14,500 km, district roads (36,000 km) and communal roads (28,000 km). In addition there are approximately 30,000 km of village roads serving the needs of rural communities and farming.

The modernisation of the country’s road network will put a strain on Romania’s budgetary resources, and will require greater use of private capital, as well as finance from multilateral institutions. The estimated cost of the national programme to construct and upgrade the road infrastructure is €2.6bn (about US$3.3bn) in 2004-07. EU assistance to Romania is substantial, amounting to about €630m (about US$790m) annually from three pre-accession programmes. The funding from two of these programmes, Ispa and Sapard, is earmarked for infrastructure spending. Romania also receives loans from the World Bank, European Investment Bank (EIB) and European Bank for Reconstruction and Development (EBRD) to help upgrade its main road corridors.

The 2006 consolidated government budget envisages increased spending on motorway construction. The government has said that it will accelerate the construction of the motorway link between Constanta on the Black Sea and the capital, Bucharest, as part of the European Corridor IV, and it has announced proposals to build ring roads around the largest cities on the Corridor IV route, including Bucharest.

More controversially, the government has said that it will also go ahead with the construction of the motorway from Brasov in central Romania, through Transylvania to Bors on the Hungarian border. The US$2.5bn Brasov-Bors project, which runs parallel to a section of the proposed Corridor IV from central Romania to the Hungarian border at Arad, was approved by the outgoing Social Democratic Party (SDP) government in 2003 without a competitive tender, and has been criticised by the EU. The current government had previously argued that it did not have the resources to fund the construction of both motorways and that it favoured the construction of the Corridor IV link to the Hungarian border, which is supported by the EU and the EBRD. It also argued that the contract prices for cement were roughly four or five times higher than Romanian prices. However, the Brasov-Bors motorway is supported by politicians representing the ethnic Hungarian minority in Transylvania, and the consortium chosen to construct the motorway, which is headed by the US firm Bechtel, has threatened to sue the government if the contract is broken.

The rail network, which is the main means of internal transport for passengers and freight, covers 14,217 km, the fourth-largest in Europe. However, only 35% of the system is electrified, and the rolling stock is in urgent need of replacement. Following years of falling volumes, the number of passengers on the railways seems to have stabilised at around 500,000 per day. Annual cargo traffic volumes are about 70m tonnes, mainly coal, oil products, common metals, cement, quarry products, chemicals and agricultural items.

In November 2004 Alcatel (France) and Romania’s state-owned railway, CFR, opened in Timisoara the first of four railway stations to be upgraded with a computerised system to route trains and supervise traffic. The Timisoara project included the complete modernisation of the station’s indoor and outdoor facilities. The work was completed under a €30m contract signed in 2000 and financed by the EU’s Phare pre-accession aid programme. Work on the three other stations (Bucharest, Brasov and Arad) was completed in 2005. The Bucharest-Constanta railway route is being upgraded with a US$500m investment, using government funds, Ispa funds and a loan from the Japanese Bank for International Economic Co-operation. Passenger trains are expected to run at 160 km/h on the route once upgrading is finished.


Shipping along the Danube, which flows for 1,075 km through Romania and provides the country with its principal trade connections to central Europe, has largely recovered from the disruption caused in 1999 by the bombing of bridges during NATO attacks on Serbia and Montenegro. The canal from the Black Sea near Constanta to the Danube will eventually offer long-term opportunities for development, as the newly independent Caspian states seek outlets for hydrocarbons exports that bypass the Bosphorus Strait. Maritime safety standards remain poor and the detention rate for Romanian vessels is high.

Air transport

Romania has a total of three international and 16 domestic airports. Four new domestic airports are planned, and the one at Cluj-Napoca is being upgraded to international standards. Bucharest’s international airport at Otopeni is undergoing a major upgrade.

Tarom, the state-owned and largest Romanian airline, is waiting for more favourable international market conditions before setting a date for privatisation. In the first half of 2005 Tarom had an operating profit of US$3.7m, a significant increase compared with 2004, when it earned US$2m over the year as a whole. During the same six-month period, the company had 720,000 passengers, a year-on-year increase of 10%. Tarom's fleet is new, and as long as it improves profitability it should be able to attract investors. According to the company's business plan, Tarom intends to fly 1.45m passengers in 2006, 1.57m in 2007 and 1.8m in 2008, and to achieve an average annual passenger growth rate of 9-10%. The six most profitable destinations to which Tarom flies are Cyprus, Israel, Austria, Spain, Greece and France.

In coming years, however, Tarom will face growing competition from low-cost airlines. In 2007 Romania will sign the “Open Sky” agreement, which allows any airline from the EU to set up in business anywhere in the EU. As happened in the east European countries that joined the EU in 2004, Romania can expect to be inundated with requests from low-cost operators such as easyJet and Ryanair. Among private local companies that have entered the market since 1995, Airom 2000, Carpatair and Acvila Air are the largest. Airom 2000 runs tourism charter flights, mostly to the eastern Mediterranean, whereas Carpatair handles small domestic flights and flies to Italy and Germany. Acvila Air runs regular passenger flights to Ukrainian cities in collaboration with Air Ukraine. Several low-cost airlines have also started operating in Romania, or are planning to do so soon. Volare began operating in 2003 and Blue Air in December 2004. In 2006 WizzAir will be flying to the Hungarian capital, Budapest, and Sky Europe to the Slovakian capital, Bratislava.


Romania is one of the fastest-growing IT markets in eastern Europe. The country has made significant progress in all of the information and communications technology (ICT) subsectors, including basic telephony, mobile telephony, Internet and IT. Telecommunications companies such as French-owned Orange Romania and Mobifon (Canada), for example, are now among the most profitable in the country.

The fixed-line telephony market was liberalised on January 1st 2003, breaking the monopoly of the national operator, Romtelecom, in which the Greek company OTE has a 53% stake. Increased competition has forced Romtelecom to reduce tariffs and has led to a more rapid increase in telephone line density. Fixed lines numbered an estimated 6.2m at the end of 2004, representing a penetration of 28.6%—low even by regional standards. The system is being upgraded constantly, but demand is growing at least as fast as supply. The government plans to invest US$7bn-8bn over 15 years in a programme that is supported by the World Bank and the EBRD. The programme includes provisions for the installation of 500,000 new telephone lines and the introduction of digital systems.

The value of the mobile telephony market grew by 56% in 2004 to €205m. The number of subscribers surpassed 10m at the end of 2004, providing 50% coverage, which is respectable, given that average coverage was about 30% in EU15 countries in 1999 and surpassed 50% only in 2000 (in 2003 it was more than 70%). Potentially, Romania is a large market, which is expected to grow rapidly over the next few years, with mobile coverage likely to surpass 60% (more than 13m subscribers) by 2006 and 70% by 2010.

Romania has four main mobile suppliers, Mobifon (Canada and UK), Orange (France), Cosmorom (controlled by COSMOTE, the mobile arm of the Greek telecoms operator OTE) and Telemobil. Mobifon was the subject of the largest takeover in Romania, with Vodafone (UK) paying an estimated US$3bn in 2005 to acquire a 79% share in the company from Telesystem International Wireless Inc of Canada. The acquisition takes Vodafone’s stake in the company to 99% and is intended to result in the integration of Mobifon into Vodafone’s international operations. Competition between Mobifon, which runs the mobile telephone operator Connex (with about 48% of the cellular market), and Orange is fierce. The provision of third-generation (3G) mobile telephony—which offers high-speed Internet access as well as voice and data services—is now getting under way following the award of two licences, one to Mobifon and one to Orange.

Deregulation and liberalisation are creating greater competition from cable TV operators in the local calls market, involving a large number of small suppliers. The number of cable TV subscribers reached 3.75m in 2003, with more than 75% of urban households having access to cable TV, compared with 15% of rural households. Romania has more than 20% of all the cable TV subscribers in eastern Europe (about 19m), and has about the same number of subscribers as France, a country with almost three times its population.

The ICT sector is one of the strongest components of Romania's economy. The sector has received priority attention from the government, resulting in impressive development, offering Romania the latest technologies in most subsectors. The rapid growth of the ICT sector is sustained by the strength of Romania's large pool of highly skilled labour in engineering and electronics manufacturing, as well as by its high number of software developers.

Romania is the leader in Europe, and sixth in the world, in terms of the number of certified IT specialists—with density rates per 1,000 inhabitants greater than in the US or Russia. There are about 64,000 specialists in the IT sector. Approximately 5,000 of the 30,000 engineers graduating every year in Romania are trained in ICT. Of the pool of 64,000 qualified ICT specialists, more than 45,000 work with private companies and almost 19,000 are software engineers. The number of ICT graduates rose from 3,000 in 1986 to 5,500 in 2003 (the US has only 23,000 ICT graduates annually in a population of 290m).

The IT market has, until recently, grown relatively slowly compared with other countries in the region, but growth rates have started to accelerate. In 2004 the market was worth US$874m, with computer hardware making up about 63% of the total, packaged software 11%, and computer services 26%. The personal computer (PC) market is estimated to have grown by more than 50% year on year in 2004, after growing by 40% in 2003, 28% in 2002 and 25% in 2001. The software market remains undeveloped, with software and services accounting for 37% of the IT market in 2004, compared with 50% in Hungary and over 70% in the EU, as purchases still tend to be concentrated on hardware. The domestic software market has been hampered by legal and bureaucratic obstacles, but the introduction of leasing in software following the passage of new legislation in 2004 is likely to speed up development. The software industry is likely to expand through the export sector, led by sales to the EU.

The Internet

The total number of Internet users surpassed 4m in 2004, from just 158,000 in 1998. About 16% of users access the system on a regular basis, and 24% do so at least once a week. The high computer literacy and good English-language skills of the population, along with the existence of a widespread cable television network and the high penetration of mobile telephony will support increased Internet access. The total number of PCs per 1,000 people was 120 at the end of 2004, but this is still low by regional standards.

The media

Since 1989 a free press has flourished and new media outlets have proliferated. For most households, the broadcast media are the main sources of information. Public television broadcasts through two mainland channels (TVR 1, a general interest channel, and TVR 2, which focuses on cultural and educational programmes) and two international satellite channels (TVR International and TVR Cultural). There are several regional public television channels, but TVR 1 is the only national channel covering almost the whole country. There are several private competitors at national level, the most important being ProTV, Antena 1 and Prima TV. The first two have more viewers in the cities than public television. There are many other private stations broadcasting nationally by satellite and there are more than 100 local private TV stations. More than 3.3m viewers are connected to private cable TV networks, and, in the large cities, the percentage of households watching cable TV is 80-90%.

The print media is diverse, but circulation figures are low for a country of 22m people. More than 20 dailies are published in Bucharest, and most of them have a national circulation. Less than half earn enough revenue from advertising, however, to be comfortably self-sustainable. In the regional market the picture is similar, with up to six dailies competing for an audience in cities—such as Constanta, Timisoara or Iasi—with populations of less than half a million. The most popular daily is Libertatea, a tabloid owned by the Swiss media group Ringier, which sells on average more than 200,000 copies per day. Jurnalul National, owned by the Voiculescu family (whose head, Dan Voiculescu, leads the Conservative Party, which is now in government), has increased its circulation recently and in 2004 was printing 150,000 copies per day. Evenimentul Zilei, which started in 1992 as a tabloid and is also owned by Ringier, is now considered one of the more serious dailies and sells just under 100,000 copies per day. Adevarul, the largest newspaper during the communist era—printed under the name of Scinteia (The Flame)—has built a reputation as a good-quality newspaper and retains a place among the highest-circulation dailies, selling 100,000-120,000 per day.

Despite the apparent diversity of the print media, ownership is concentrated and the number of genuinely independent media sources is limited. Freedom of expression has sometimes been undermined by efforts to charge journalists with slander and causing offence to the authorities. In 2003 a revised Penal Code was approved by parliament, repealing the crime of "insult" and removing the possibility of a prison sentence for slander. The repeal of the crime of slander is still not in force, owing to delays in implementing the Criminal Code adopted in 2004. In general, however, political pressure on the media has lessened over the past year or so and newspapers are less politicised. This trend is especially noticeable in the management of public radio and television.

Resources and infrastructure: Energy provision

A regional energy leader

Romania is the only central European country with significant primary energy resources, particularly oil and coal. In fact, Romania is closer to energy self-sufficiency than any other country in the region, with the exception of Russia. Although an important regional oil and natural gas producer, the country is not a major energy producer in global terms and has to rely on imports to meet local demand in the oil, natural gas, coal and power sectors. The energy sector accounts for about 5% of total industrial output and is the third-largest employer after the textiles and machine-building industries (employing about 6% of the Romanian labour force).

Energy production declined significantly during the 1990s as a result of the contraction of heavy industries such as petrochemicals, fertilisers, metallurgy, machine-building and cement. However, primary energy availability grew by 6% in 2004 to 41.5m tonnes of oil equivalent, of which 25.1m tonnes (60.6%) were produced domestically and the remainder was met by imports.

Oil and gas

Romania has substantial oil and gas reserves—which have attracted the interest of foreign investors—as well as a large-scale and highly developed refining industry. Romania had proven oil reserves of 900m barrels in 2003, according to BP (UK). The country remains the largest oil producer in central and eastern Europe, despite a steady decline in its output over the past 30 years. The country's oil production plummeted by 58% between 1976 and 2003, from 294,000 barrels/day to 123,000 b/d. As a result, Romania can meet only half of its consumption from domestic production. Production is expected to fall further over the next decade, although more slowly than gas production, resulting in import demand of around 10m tonnes by 2010. The country has ten oil refineries with an overall refining capacity of 504,000 b/d, the highest in the region. The state-owned refineries are running at 50% capacity or less, owing to a lack of crude oil supplies, and need substantial injections of capital to modernise and improve efficiency.

In July 2004 the Romanian government finalised the sale of the integrated oil company, Petrom, to OMV, the Austrian oil, gas and petrochemicals company. The privatisation of Petrom, which was opposed by many vested interests, is the most significant in the country's post-communist history. The contract obliges OMV to maintain Petrom as an integrated oil and gas company producing an annual minimum of 4.2m tonnes of crude oil and 4.5bn cu metres of gas over the next five years (current production levels are 5.6m tonnes of crude oil and 6bn cu metres of natural gas). The contract also specifies detailed commitments for the size of the capital increase that must be used for modernisation, the introduction of new technologies and environmental protection. The Romanian government will assume responsibility for any claims of environmental damage arising from the pre-privatisation period.

Romania has proven natural gas reserves of 0.31trn cu metres, according to BP. The poor investment climate has discouraged additional exploration. Natural gas production was 10.4m tonnes of oil equivalent in 2004, a decline of 70% since 1982, when output peaked. Natural gas transportation capacity reached 28bn cu metres per year in March 2002, up from 10bn cu metres previously, owing to the opening of the 200-km Isaccea-Negru Voda pipeline, linking the country with networks in Ukraine and Bulgaria.

In 2004 the Social Democratic Party (SDP) government also sold its 51% share in the two natural gas distributors, Distrigaz Sud and Distrigaz Nord, to Gaz de France for €311m (US$385m) and Ruhrgas for €303m, respectively, in 2004. The government is considering the best method for selling off the natural gas extraction company, Romgaz, and is believed to favour some form of joint venture that would allow it to retain a stake in the firm.


Romania is rich in coal deposits, with proven coal reserves of 1.46bn tonnes, most of it lignite or sub-bituminous. Proven coal reserves are enough to last another 48 years at the current rate of extraction. The country’s coal production has declined by more than 50% since 1989, when output peaked. Coal production underwent a steep decline in the late 1990s, when the government embarked on a programme of mine closures. Output has picked up alongside the economic recovery since 2000, but it is still well down, even compared with the levels of the early 1990s. In 2004 the country produced 6.3m tonnes of oil equivalent.


Romania's capacity for power generation is 22.2 gw, the largest in south-eastern Europe. Power generation grew by 9.8% between 2000 and 2004, to reach 57bn kwh. Power generated by Romania's sole nuclear-power plant, at Cernavoda, reached a record level in 2004, at 5.1bn kwh, providing 10.5% of total consumption. However, about 60% of existing installed capacity is more than 20 years old and installations of about 8 gw will have to be rehabilitated or replaced by 2010. Despite substantial increases in electricity tariffs in recent years, the industry faces severe financial problems, which result largely from the arrears owed by large, loss-making, state-owned firms.

The eight electricity distributors have either been privatised or are in the process of privatisation. Majority stakes in Electrica Banat and Electrica Dobrogea were sold to Enel of Italy for €112m in 2004. In April 2005 a Czech company, CEZ, signed the contract for the acquisition of a 51% share in Electrica Oltenia for €115m, and a German firm, E.ON Energie, acquired a 51% stake in Electrica Moldova for €100m. CEZ has also announced plans to bid for three power plants at Craiova, Rovinari and Turceni as part of its strategy to become a leading energy supplier in central and south-east Europe. The government is expected to proceed with the privatisation of the electricity generators, Termoelectrica and Hydroelectrica. Distrigaz Sud has announced an ambitious programme of investment and modernisation, including the replacement of obsolete pipelines, diversification of imports and the development of new production facilities.

The authorities have been rehabilitating ten thermal-power stations, with a combined capacity of 1.36 gw, at a cost of about US$460m between 2000 and 2005. Construction of the second unit of the Cernavoda power plant was almost completed in 2005, and it is expected to become fully operational in March 2007, when it will account for 19% of total power supply. A feasibility study for the third reactor was conducted by AECL Canada, Ansaldo Italy and Korea Hydro and Nuclear Power in 2004. Work on the third reactor, which is scheduled to be connected to the grid in 2011, is expected to commence in 2006.

The economy: Economic structure

Main economic indicators, 2005
(Economist Intelligence Unit estimates unless otherwise indicated)
Real GDP growth (%) 4.0
Consumer price inflation (av; %) 9.0a
Current-account balance (US$ m) -8,955
Exchange rate (av; Lei:US$) 2.9a
Population (m) 21.6
External debt (year-end; US$ m) 34,491
a Actual.
Source: Economist Intelligence Unit, CountryData.

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Industry and agriculture have contracted in real terms and as a percentage of GDP since the onset of the transition in 1990-91 and the second round of structural changes in the mid-1990s. The share of industry (including construction) in GDP fell from 46% in 1991 to 31.5% in 2005. The share of agriculture and forestry in GDP had fallen from an average of 20% of GDP in the early 1990s to 13% in 2004. The services sector, which made up just 24% of GDP in 1990, now accounts for more than 50% of GDP. The population, at 21.6m in mid-2005, is one of the largest in eastern Europe, but, among the ten largest east European countries, Romania ranks as one of the lowest in terms of GDP per head in purchasing power parity (PPP) terms.

Comparative economic indicators, 2005
  Romaniaa Hungarya Polanda Bulgariaa Czech Republica
GDP (US$ bn) 92.5 110.3 302.8 26.0 123.8
GDP per head (US$) 4,279 11,026 7,937 3,388 12,097
GDP per head (US$ at PPP) 8,487 16,277 12,677 8,923 18,016
Consumer price inflation (av; %) 9.0b 3.6b 2.2b 5.0b 1.9b
Current-account balance (US$ bn) -9.0 -8.7 -4.3 -3.9 -3.5
Current-account balance (% of GDP) -9.7 -7.9 -1.4 -15.0 -2.8
Exports of goods fob (US$ bn) 27.6 61.2 96.7 11.5 77.1
Imports of goods fob (US$ bn) -37.3 -63.8 -99.3 -16.5 -75.5
External debt (US$ bn) 34.5 66.5 105.3 16.4 45.8
Debt-service ratio, paid (%) 17.0 23.8 19.4 22.8 8.9
a Economist Intelligence Unit estimates. b Actual.
Source: Economist Intelligence Unit, CountryData.

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The economy: Economic policy

Restructuring has been delayed

The pace of economic reform in Romania has been substantially slower than in the transition economies in central Europe that joined the EU in 2004. In 1990-96 governments were dominated by former communists, forerunners of the Social Democratic Party (SDP), who failed to implement the structural changes to industry, agriculture and the financial sector that were required to create a functioning market economy (FME). Government subsidies to loss-making industries resulted in large fiscal deficits that were partly financed by inflationary monetary emissions and the build-up of arrears. The failure to restructure industry contributed to the poor competitiveness of the engineering sector and persistent pressures on the current account.

A weak financial system in the 1990s

The centre-right Democratic Convention (DC) government tried, with limited success, to promote market-oriented policies during its period in office in 1996-2000. Critically, the DC government failed to privatise state banks or to create a properly functioning and regulated financial system capable of channelling savings into productive investment and providing security for the population's savings. Throughout the 1990s state banks continued to grant soft credits to loss-making industries, and the financial sector was rocked by a succession of scandals that affected the savings of large numbers of the population. Both the European Commission and the IMF published damning reports on the progress of economic reform in Romania at the end of 2000.

Progress since 2000

Despite its former communist pedigree, the SDP government that ruled in 2001-04 proved to be more committed than its predecessors to implementing tight macroeconomic policies and imposing financial discipline on enterprises. The government signalled its commitment to macroeconomic stabilisation and structural reform by concluding an 18-month stand-by agreement with the IMF in October 2001. The main points of the IMF programme included a progressive reduction in the annual consolidated budget deficit; measures to address the poor financial performance of state-owned enterprises and utilities and to eliminate losses in the energy sector; the implementation of an ambitious privatisation programme; and strengthening the regulatory framework and supervision in the financial system.

Reform momentum is sustained

The SDP government completed the stand-by agreement in October 2003, the first time that a post-communist Romanian government had done so, after five failed attempts in the 1990s. In July 2004 the government negotiated a precautionary stand-by agreement worth SDR250m (US$370m), which provided for close monitoring of key reform targets over the two years to July 2006. The agreement envisaged a reduction in the budget deficit to 2.1% of GDP in 2004; a year-end inflation target of 6% in 2005; a reduction in the current-account deficit from 5.8% of GDP in 2003 to 5.3-5.5% of GDP in 2004; and a limit of 9% on the growth of the state-sector wage bill. The agreement also required the government to accelerate privatisation in the energy sector, including the sale of 51% of the integrated oil company Petrom, and the sale of the remaining state-owned gas and electricity distributors. The government implemented other structural reforms in 2004, including large-scale job cuts in the mining and railway sectors and the privatisation or closure of 19 large state enterprises.

The government cut the consolidated budget deficit to 1.1% of GDP in 2004, substantially below the target agreed with the IMF. However, a rapid expansion of consumer credit in 2003-04, and the continued high level of world oil prices, pushed the current-account deficit up to 7.6% of GDP in 2004. The need to increase energy prices to cost-recovery levels, as agreed with the IMF, also contributed to a rise in inflation, to 9.3% at end-2004, above the IMF target.

Tax cuts bring government into new conflict with the IMF

The economic policy of the coalition government that came to power at the end of 2004 has been largely determined by the pro-market policies of its largest parliamentary grouping, the National Liberal Party (NLP). The DA government introduced a 16% flat-rate tax on income and profits; revised the Labour Code, which was seen as one of the main factors contributing to labour-market inflexibility; accelerated the liberalisation of the capital account; and shifted monetary policy away from exchange-rate targeting towards inflation-targeting, largely to meet the targets required for EU accession in 2007. The liberalisation of the capital account has led to large capital inflows, which have, in turn, contributed to a significant real appreciation of the leu. This has complicated monetary policy, as reductions in interest rates intended to deter capital inflows have resulted in a further expansion of consumer credit, exacerbated macroeconomic imbalances and created new tensions with the IMF.

In February 2005 the new government agreed with the IMF key macroeconomic and financial targets for 2005, including a fiscal deficit of 1% of GDP, a year-end inflation target of 7% and a current-account deficit of 5.5% of GDP. Although the government was relatively successful in meeting fiscal targets in 2005, year-end inflation reached 9% and the current-account deficit exceeded 9% of GDP, following a surge in imports fuelled by the rapid expansion of consumer credit and high world oil prices. At the same time, slow progress was made in privatising public utilities, and public-sector wages grew substantially faster than inflation and productivity, creating additional fiscal pressures. The IMF announced the suspension of the precautionary stand-by agreement with Romania on October 31st 2005, after expressing concern at the level of inflation and the size of the current-account deficit, and failing to reach agreement over the size of the budget deficit for 2006. The IMF communiqué revealed deep differences of opinion over the general trend of fiscal and monetary policies, the structure of government expenditure and the predicted size of government revenue for 2006.

The government had proposed a consolidated budget deficit equivalent to 0.5% of GDP for 2006. The IMF's proposal of a small fiscal surplus was considered by the government to be too restrictive in view of additional expenditure required to repair damage caused by floods in 2005, which is expected to amount to 1% of GDP, and scheduled expenditure on other large infrastructure projects, including motorway construction. The IMF argued that the government’s revenue proposals for 2006 were unrealistic and would result in a deficit of at least 1% of GDP. The Fund recommended an increase in the rate of value-added tax from 19% to 22% in January 2006, to compensate for the shortfall in revenue resulting from the introduction of the flat-rate tax on incomes and profits, which it estimated at €1bn ($1.3bn), equivalent to 1.5% of GDP. This was rejected by the government, which argued that continued growth in 2006 should enable it to meet revenue targets without increasing tax levels significantly. The IMF also observed that government revenue in Romania, at around 30% of GDP, is substantially below levels prevailing in the EU, including those of the ten new member states. Furthermore, additional revenue is required to finance capital expenditure on health, education and infrastructure, in addition to expenditure related to EU accession. The EU has also expressed concern at the slow pace of disinflation and the widening of macroeconomic imbalances in 2005.

The economy: The economics of accession

Romania is urged to tackle macro-imbalance and prepare more actively for EU membership

Romania's EU accession prospects were boosted by the European Commission's decision to grant it the status of a "functioning market economy" (FME) in its annual report in October 2004. However, the Commission’s October 2005 report was far more critical of the progress of structural reforms and outlined a number of areas in which Romania might be considered deficient in meeting the economic criteria for accession in 2007. The report argued that vigorous implementation of economic reforms would be required for the economy to cope with competitive pressures on entry.

The Commission expressed concern at the widening of macroeconomic imbalances in the year to September 2005. These imbalances were the result of pro-cyclical fiscal policy caused by reductions in profit taxes and the introduction of the flat-rate income tax, as well as slippages in public-sector wage policy. The Commission warned of the need to reduce the public-sector deficit by tightening financial discipline in state-owned enterprises and adjusting energy prices to cost-recovery levels.

The rapid appreciation of the leu, partly resulting from the shift of monetary policy towards inflation-targeting, is having a negative impact on the trade balance, and was another area of concern mentioned in the report.

The report specified three stages of preparation for entry in 2007:

  • problems that are likely to be resolved in time for entry if current progress is maintained, including on transport, anti-trust enforcement and mutual recognition of professional qualifications;
  • areas in which increased efforts would be needed to meet the accession criteria by 2007, including the satisfactory enforcement of regulations on state aid; the implementation of customs rules and enforcement of financial control; and
  • areas of serious concern, in which immediate action will be required to meet EU standards, including on mechanisms for participation in structural funds, the control of industrial pollution, the fight against corruption, and food safety.

The report urged the authorities to spare no effort to remedy these deficiencies without delay. In its general evaluation of economic criteria, the report urged the government to give priority to establishing a prudent fiscal policy by strengthening the revenue base and controlling public-sector wages; accelerating privatisation and dismantling non-viable enterprises; improving financial discipline in state owned enterprises; and making greater progress in reforms of the judicial system and the public administration to create a positive business environment.

Privatisation proceeds slowly

After more than a decade of transition the private sector remains under-developed, with state-owned enterprises continuing to account for a significant share of economic activity. The private sector accounted for 70% of GDP in 2004, compared with 80% in Hungary, according to data from the European Bank for Reconstruction and Development (EBRD). After accelerating towards the end of 2004, the pace of privatisation slowed in 2005. Bankruptcy procedures are cumbersome and have prevented the liquidation of large-scale tax debtors. Large parts of the energy and mining industries incur losses and rely on direct subsidies and debt cancellation.

Although most small and medium-sized enterprises (SMEs) have been privatised, large-scale privatisation has been slow. The SDP government tried to accelerate the privatisation of large-scale enterprises by replacing the State Ownership Fund (SOF) with the Authority for Privatisation and Management of State Assets (APAPS), under the direct control of the minister for privatisation. The government announced a new Law on Accelerated Privatisation in March 2002, which included proposals to privatise loss-making firms for the symbolic sum of €1. APAPS proved reluctant to liquidate loss-making enterprises, however, and was wound up in March 2004. Its responsibilities were handed over to the State Assets Resolution Agency (AVAS), which owns 90% of companies in state ownership, while a further 10% are held by government ministries.

The government successfully privatised four of the eight electricity distributors owned by ministries, two gas distributors and the state-owned oil company Petrom and plans. The number of companies in state ownership fell from 1,673 at the end of 2001 to 1,187 in mid-2004, but had only fallen to 1,180 a year later. AVAS continues to hold assets in just over 1,000 companies, of which 544 are considered unfit for privatisation and face liquidation. AVAS is also monitoring 6,500 companies in the process of reorganisation or bankruptcy.

The economy: Economic performance

Gross domestic product
(% change year on year unless otherwise indicated; constant prices)
    Annual average
  2005a 2000-04
Private consumption 9.7 5.4
Government consumption 4.0 6.4
Gross fixed investment 9.4 7.9
Stockbuilding n/a 0.9
Exports of goods & services 6.8 15.3
Imports of goods & services 17.2 18.3
GDP 3.6 5.3
a January-September official data.
Sources: National Institute of Statistics; Economist Intelligence Unit.

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Real GDP started to recover in 2000 after falling by 12.1% in 1997-99. Growth accelerated from 2.1% in 2000 to an annual average of 5.3% in 2000-04, before accelerating to 8.3% in 2004, when agricultural output was boosted by an exceptional harvest. Real GDP growth slowed to 3.6% in the first three quarters of 2005 as a result of calamitous floods, which resulted in a fall in agricultural output of 12.6%, as well as a slowdown in industrial growth. Despite strong economic performance in the early part of the present decade, real GDP re-attained its estimated 1989 level only in 2004. However, the structure of output has changed substantially over this period, reflecting the demands of domestic consumers and export markets, with a reduced share of heavy industrial production. Furthermore, income obtained from workers abroad means that gross national income greatly exceeds GDP.

Restructuring brings limited benefits in 2000-02

An initial growth spurt in 1993-96, following the collapse in output in 1989-92, was achieved largely by expanding output from traditional, energy-intensive and loss-making heavy industries. This generated large trade deficits and inflationary pressures. Tighter fiscal and monetary policies implemented by the DC government, together with the restructuring and closure of large, loss-making enterprises, contributed to a large contraction in demand and output in 1997-99. Investment was particularly badly affected in 1998-99 owing to the Russian financial crisis and the war in former Yugoslavia.

Positive growth returned in 2000 as a result of a strong expansion in exports to the EU and a recovery in investment. Robust exports continued to fuel GDP growth in 2001-03, but investment and household consumption became increasingly important contributors to the growth of demand in 2003-05, outstripping the growth of domestic production and increasing the deficit on net exports. Private consumption grew by 10.8% in 2004 and by 9.7% in the first three quarters of 2005, while gross fixed capital formation grew by 10.1% and 9.4% in each of these periods respectively. Export growth slowed from 14.1% in 2004 to 6.8% in the first three quarters of 2005, as Romania faced increasing competition for its clothing exports in EU markets. However, imports grew by 17.2% in the first three quarters of 2005, following growth of 17.8% in 2004, so that net exports grew to -9.7% of GDP.

Private consumption in 2003-05 was fuelled by the rapid expansion of consumer credit and an increase in real wages that exceeded the growth of productivity. Household demand was boosted in the first three quarters of 2005 by the expansion of consumer credit, significant pay increases for public-sector workers, and the introduction of the flat-rate income tax, which resulted in a substantial increase in the take-home pay of high- and medium-income earners (real net wages increased by an average of 15%). The National Bank of Romania (NBR, the central bank) has announced that the growth of consumption is unsustainable and that tighter policy measures will help to contain it in 2006.

Inflation is high by regional standards

Inflation has remained high by regional standards. Year-end inflation peaked at 151% in 1997, following the liberalisation of prices and exchange rates, and remained above 40% in 2000. Despite progressive annual reductions in the rate of inflation, year-end inflation was brought below 10% (to 9.3%) only in 2004. Although the NBR adopted inflation-targeting in August 2005, it proved difficult to meet the inflation target for 2005 in the face of increases in administered prices, excise duties, world energy prices and food prices. Although average inflation fell from 11.9% in 2004 to 9% in 2005, year-end inflation fell by just 0.7 percentage points to 8.6% in 2005. The NBR estimates that "core" inflation—which excludes changes in administered prices and which monetary policy is better able to influence—was about 6% at the end of 2005. Further sharp increases in energy prices in January 2006 will make it difficult to meet the year-end inflation target of 5% for this year.

Poverty levels have fallen

The reforms of the Democratic Convention government of 1996-2000 contributed to a rise in income inequality. Income inequalities narrowed in 2000-04 under the government led by the Social Democratic Party (SDP). However, the introduction of the flat-rate income tax in January 2005 by the government that followed has resulted in higher than average increases in the post-tax income of workers in the highest-paid sectors (including air transport, financial services and energy). Workers in the public-sector and in the utilities have also received above-average increases in net wages. However, wage growth in export industries (such as metallurgy and clothing) has been held back by the need to preserve competitiveness in the face of the real appreciation of the leu. As a result, wages have remained depressed in some of the worst-paid sectors, such as textiles and clothing. Poorer households, which traditionally suffer most from high levels of inflation, have also suffered disproportionately from above-average increases in the prices of gas and electricity and utilities, as these can account for more than 30% of expenditure.

According to a report by the Anti-Poverty and Social Inclusion Commission (CASPIS), which attempts to estimate the incidence of poverty using methods that are consistent with those of UN agencies, 25.1% of the population were living in poverty in 2003 and 8.6% in extreme poverty. This compares with peaks of 35.9% and 13.8%, respectively, in 2000, when the SDP took power, and of 20.1% and 6.3% in 1996. Romania ranked fourth-poorest country in a survey of 28 European states conducted in 2003 by the European Foundation for the Improvement of Living and Working Conditions (Eurofound).

Poverty is acute when the head of the household is unemployed, a farmer or a pensioner, but the largest number of poor people live in salaried households, especially those made up of large families. The north-east region of the country has 35.4% of the population living in poverty, compared with just 8% in Bucharest, the capital. The incidence of poverty will lessen as continued real GDP growth takes a growing number of households above the poverty threshold. CASPIS estimates that by 2007 5% of the population will be living in poverty and 5% in severe poverty.

The economy: Regional trends

Uneven regional development

Romania has experienced regional development problems for as long as it has existed as an independent state. Before the first world war development was concentrated in the capital, Bucharest, the oilfields and large provincial towns such as the former Moldavian capital of Iasi and the ports of Braila, Constanta and Galati. In the inter-war years most economic activity was confined to a growth axis connecting Bucharest with Brasov, Sibiu and Timisoara, an area that was well endowed with energy, transport and large, urban markets. Under post-war communist central planning, the emphasis was on nationwide urbanisation and industrial production, and some regional disparities were reduced. Central planning took some regional issues into account and the administrative system helped to focus attention on 16 regional centres during the 1950s and 1960s, and then on some 40 counties after 1968. Since the fall of communism in 1989, the market economy has been developing on this highly uneven regional base.

Post-communist Romania remains a centralised state. The county system inherited from the communists remains in force, with the country divided into 40 counties plus the municipality of Bucharest. About 10% of the population live in the Bucharest municipality, where a disproportionate amount of the country's wealth is also concentrated. Official data show sharp regional variations. Bucharest, the centre and the west of the country tend to perform well when comparing development indicators, whereas the north-east and south-west perform poorly. Regional inequalities are increasing as enterprise restructuring takes effect. Long-term unemployment is rising in regions that have been subject to enterprise closures and large-scale redundancies, whereas unemployment is low and falling in Bucharest and the counties close to the Hungarian border.

Regional development has assumed greater economic importance as Romania prepares for membership of the EU. The EU has said that Romania's current county-based administrative structure is inefficient and generates losses because of competition for funds among the relatively small administrative areas. The EU encourages the creation of larger "developing regions" that are capable of entering into partnership with similarly structured European regions. In 1998 the DC government divided the country into eight development regions: the problem is that the counties and not the regions are the structures of local administration and thus the capacity of the regions to fulfil their intended role is limited. In 2002-03 there was a wide-ranging debate on the regionalisation of the country, with talk of eight regional governors being appointed to supervise the administration and absorption of EU funds (for which Romania has so far demonstrated a very limited capacity) and to oversee regional development. However, the issue is an extremely sensitive one, given that regionalisation is associated with demands for political autonomy for the ethnic Hungarian minority in Transylvania. The debate seems to have been put on hold until after 2007, the target date for joining the EU, as any attempt to change the country's administrative-territorial organisation could jeopardise accession negotiations.

Economic sectors: Agriculture

A traditional producer

Romania was a major agricultural producer in the inter-war years, but forced collectivisation and the priority given to industry in the communist era took their toll on agricultural production. Although agricultural output hit record post-1989 levels in 2004 because of exceptionally favourable weather conditions, the floods that devastated agricultural production in July and August 2005 exposed the widespread problems faced by the sector. Gross value added (GVA) in agriculture fell by 12.6% in the first three quarters of 2005, following growth of 19.7% in the year-earlier period, and of 22.2% in the full-year 2004.

Agriculture employed nearly 3m people in 2003, and accounted for 35.7% of total employment. However, it accounted for only 12.9% of GVA in the economy in 2003, compared with 21% in 1993. The agricultural sector has the highest level of private ownership in the economy, with 96.1% of land in private hands and 98% of output coming from the private sector. However, the sector remains fragmented into small plots that are ill-suited to the demands of a growing, large-scale retail sector and export markets. No privatisation of state-owned farms took place in 2005 and many farms are teetering on the verge of bankruptcy. Progress in agricultural reform has been hampered by legal disputes, bureaucratic delays and local corruption in the distribution of land titles. This has hindered the creation of the properly functioning land market that is needed to permit the development of large farms. As a result, most processes remain undercapitalised and labour-intensive.

Output remains depressed

Although investment in agriculture has picked up since 2001, low levels of investment—in agricultural infrastructure, in particular—have left the sector excessively vulnerable to adverse weather conditions. The floods of 2005 were the result of the highest level of rainfall seen in central, southern and eastern counties for 50 years, which caused damage estimated at €1.5bn (US$1.9bn) and resulted in 61 deaths. The government has admitted that flood-prevention equipment was inadequate, but said that the problems were exacerbated by illegal deforestation and exploitation of rivers. Provisional figures for 2005 indicate that, following the record grain harvest of more than 23m tonnes in 2004, output of wheat and rye fell by 7.3%, maize and sorghum by 70%, potatoes by 17% and sunflower by 17%. Romania is a net importer of food and agricultural products and the disastrous harvest of 2005 will increase the deficit in agricultural trade in 2006.

Romania still lacks the administrative capacity to enforce significant parts of EU legislation on the agricultural sector or to meet EU conditions for payment and control. It will face severe problems in implementing the agricultural chapter of the acquis communautaire (the body of EU law). Although a national plan for rural development for 2007-13 has been established to manage post-accession problems, Romania will continue to encounter difficulties in meeting EU phyto-sanitary standards, identifying and registering cattle and other livestock numbers to comply with EU legislation, and meeting EU standards for veterinary checks on imports from third countries.

Economic sectors: Mining and semi-processing

Romania has small deposits of minerals, such as iron ore, bauxite, copper, lead, zinc, gold and uranium. Reserves are estimated at 2.5m tonnes for bauxite, 600,000 tonnes for lead, 1.4m tonnes for zinc and 1.5m tonnes for copper. Many ores are low-grade, and mining has suffered from a lack of maintenance and investment. The sector also suffers from a poor environmental record.

Economic sectors: Manufacturing

The strategy of heavy industrialisation during the communist era left Romania with a concentration of relatively obsolete plants in the metallurgical, heavy engineering and chemical industries. Production of sophisticated consumer goods and machine tools was neglected, and Romanian engineering products failed to meet the quality standards of the world market. As a result, Romania has been heavily dependent on imported technology and foreign direct investment (FDI) for industrial restructuring. The modernisation of industry has accelerated in the first decade of the new century, with privatisation attracting large inflows of foreign capital and contributing to a trebling in the US dollar value of imports of machinery and capital equipment in 2001-05. Inflows of FDI reached 7.4% of GDP in 2004, one of the highest proportions in the accession states.

Automotives take off

There are now signs that measures to restructure industry, including the reduction of excess capacity in the metallurgical and engineering industries, and the upgrading of capital stock, are starting to succeed, as investment is concentrated on modernising sectors with long-term potential. The automotive industry, which has one of the highest levels of foreign penetration, is dominated by Dacia, which is owned by Renault (France) and accounts for over 80% of domestic production and 44% of the domestic market in 2005. Dacia’s success has been built on the introduction of the Logan model, which contributed to a 150% increase in the firm's exports of cars in 2005. Dacia has taken a growing share of the domestic market at the expense of DAR (owned by South Korea's Daewoo), whose share fell from 20% in 2004 to below 10% in 2005. The modernisation of Dacia’s plant, which also produces vans and car parts, has contributed to a growth in car production from 57,000 units in 2001 to 180,000 in 2005. Exports of cars have risen from only 2,000 in 1999 to 60,000 in 2005. Nevertheless, Romania was a substantial importer of cars in 2005, with imports of 100,000 units, as Romanians have embraced the car culture and the troubled Daewoo plant has failed to respond to growing demand. The state is expected to buy out Daewoo, before selling the plant to a strategic investor. Renault is also planning to invest €215m (US$270m) in its Pitesti plant in order to produce gearboxes for export to France, Turkey, Spain, Japan, Korea and Mexico. The government will provide aid to the plant, equivalent to about 17% of the cost—a subsidy that has been cleared with the EU.

Pharmaceuticals benefit from FDI

Romanian pharmaceutical production has benefited from inflows of FDI for modernisation of what remains a relatively backward industry by European standards. From 1990, when foreign trade was liberalised, foreign producers started to show an interest in the Romanian market, seeing in it high growth potential, in view of the country's large population (of 22m) and the low level of drug consumption per head. Foreign pharmaceutical firms entered the market through direct imports, licensing-in agreements, acquisitions—for example, GlaxoSmithKline (UK/US) bought a 65% stake in Europharm and Lek (Slovenia) bought a 90% stake in PharmaTech—and privatisations (Hungary's Gedeon Richter bought a majority stake in Armedica). FDI in the sector is leading to quality improvements, and, with more factories meeting Good Manufacturing Practice (GMP) standards, improving export prospects.

Imports account for about 80% of the market and local production for the remaining 20%. Domestic production reached US$270m in 2004, with about 1,500 types of drugs for domestic consumption and 690 for veterinary use. Exports have tended to go to countries such as Moldova, Russia and others in the Commonwealth of Independent States (CIS), as, until now, a failure to meet GMP standards has prevented many local firms from competing on Western markets. However, local producers have now obtained GMP certificates for most of their product lines and exports to west European markets are growing, although they remain a small part of total business.

The profitability of the prescription market is questionable for domestic producers, who have little power in determining prices, and they tend to concentrate on the over-the-counter (OTC) market, where prices are liberalised. After stagnating in 2003 the pharmaceutical market—which is divided into prescription drugs and OTC sales—expanded in US dollar terms in 2004 to reach US$1.06bn and in 2005 was worth an estimated US$1.57bn. Payments arrears from National Healthcare Insurance Fund (CNAS) are a significant problem for the pharmaceutical sector. The fact that some of the drugs acquired by hospitals in 2002 were still not paid for by 2005 is an indication of the financial crisis afflicting many of the country’s hospitals. With the decline of the hospital segment, most pharmaceutical companies have adopted new strategies and turned their attention to the OTC market—in other words, to prescription-free drugs. The main market players have restructured their product portfolio and rethought their sales strategies to reduce their dependency on hospitals. The recent data show that the retail segment is driving growth in the industry. Sales to hospitals represented 25% of the distribution market in 2005, and sales to pharmacies represented 75%.

Stabilisation measures delay industrial upturn

Following the initial post-1989 recession and recovery, the closure of loss-making plants in the mid-1990s contributed to a further decline in industrial output of nearly 30% between 1997 and 1999. Industrial output started to recover in 2000, expanding by 25% between the end of 1999 and the end of 2004. However, gross industrial output growth slowed to 2.2% in 2005, with manufacturing output increasing by only 2.5%. The prospects for sustained growth in Romania’s traditional export industries, including textiles, clothing and footwear, have been damaged by the ending of the EU's Multi-fibre Agreement (MFA) which has exposed Romanian exports to greater competition from developing countries, especially China. Representatives of the clothing industry, which is dominated by small and medium-sized enterprises (SMEs) producing on the basis of outward-processing agreements, have expressed concerns that the industry will face mass closures over the next few years. This will give a greater urgency to the diversification of exports towards more sophisticated, higher-wage industrial sectors, including light machinery and equipment, and electrical appliances, a trend that started in 2002 and intensified in 2004-05.

Economic sectors: Construction

A spate of huge projects towards the end of the rule of Nicolae Ceausescu, gave the construction industry an artificial boost. In the 1990s the sector was badly hit by the decline in GDP, cuts in investment in infrastructure and industry, a decline in house-building and the recession of 1997-99. As a result, construction fell from 6.9% of gross value added (GVA) in 1996 to 4.9% of GVA in 2000.

Demand is increasing

The decline in construction was reversed in 2000. Value added in construction grew by 35% between the end of 1999 and the end of 2004, and by a further 7.1% in the first nine months of 2005. The surge in construction activity is expected to continue over the next decade in both the private and state sector, as a result of post-privatisation investment, demand for new housing as new mortgage instruments are expanded, construction of shopping malls in response to the growth in consumer demand, and growing investment in infrastructure, especially motorways. This will put considerable strain on the capacity of the construction sector.

Expenditure on large-scale construction projects to improve infrastructure and tourism amenities could exceed €3bn (US$3.75bn) per year over the next ten years. New motorways, including the controversial link from Brasov through Transylvania to Bors on the Hungarian border, and the modernisation of the existing road networks could cost €12bn alone over the next eight years. In addition the authorities will be required to invest in large-scale infrastructure projects to meet EU environmental regulations, including the renewal of water and sewage systems, particularly in rural areas, where provision is basic.

Other large-scale investments include the construction of a third nuclear reactor at the Cernavoda plant, commencing in 2006, and a number of major projects to improve tourism facilities, including the Dracula theme park at Snagov, near Bucharest. Although the majority of infrastructure projects will attract external finance from the World Bank, the European Investment Bank (EIB) and the EU, the government will be expected to meet about half of the cost. The financial requirements of large-scale construction projects will require the government to seek public-private partnerships and to allow foreign private companies to take a greater role in the provision and management of public services.

Economic sectors: Financial services

Banking sector reform accelerates

Privatisation and restructuring of the banking sector started late, in 1998, with the sale of the state's holding in the Romanian Development Bank (BRD) to Société Générale (France); the latter increased its holding further in November 2004. The sale of BRD was followed by the disposal of the state's share in Banc Post, and the agricultural bank, Banca Agricola. The second-largest bank, Bancorex, was placed under administration in 1999 and was absorbed by Banca Comerciala Romana (BCR). The privatisation of BCR was a condition of the stand-by agreement with the IMF secured in October 2001, but proved difficult to accomplish. The government finally announced the sale of a 61.88% stake in BCR to Erste Bank of Austria in December 2005 after a competitive tender involving 11 bidders. Erste Bank will acquire the government's holding of 36.88% and a 25% share previously held by the European Bank for Reconstruction and Development (EBRD) and the International Finance Corporation (IFC). The state now holds a majority stake in Eximbank, which is being converted into an export-guarantee institution and is the sole owner of the State Savings Bank (CEC), which is in the process of privatisation. On completion of the BCR sale, the share of state-owned banks in total net banking sector assets will have fallen from 75% in 1998 to 7.5% in 2006.

Banks with a majority of foreign capital account for 23 of the country’s 32 private banks. Banks with majority foreign capital accounted for 59% of total bank assets in 2004 (compared with 76% in Bulgaria), and for 66% of total non-government lending and 55% of total deposits. Foreign-owned banks are now starting to play a significant role in retail banking and the small business sector: they are expanding their number of branches and moving into products such as mortgages, after initially concentrating on the large corporate sector.

The clean-up or closure of problem banks, including the removal of bad and dubious loans, has greatly reduced instability in the banking sector, and vulnerability indicators have improved dramatically in recent years. The share of non-performing loans fell from 35.4% in 1999 to 3.8% in 2000, following the transfer of non-performing loans from Bancorex and Banca Agricola to the Banking Assets Recovery Agency, and had fallen further to 1.7% in 2004.

The EU concluded in its annual progress report in October 2004 that, although the banking system is sufficiently capitalised and prudently supervised, the non-banking financial sector is still underdeveloped, with small equity markets and a relatively undeveloped insurance sector.

Stock exchange

The Bucharest Stock Exchange (BSE) reopened in 1995, followed in 1996 by the launch of Rasdaq, an electronic network for registering over-the-counter (OTC) share sales. Romania's equity market, with a capitalisation of US$19.3bn at end-2005, has much to do to catch up with neighbours such as Hungary, but is starting to attract funds from foreign investors. This has contributed to robust growth in recent years, with a very strong performance in 2004 followed by consolidation in 2005. The BSE composite index grew by 21% in 2000, 39% in 2001, 120% in 2002, 31% in 2003, 104% in 2004 and 38.2% in 2005. The BET index (which reflects the value of the ten most liquid shares) rose by 100% in 2004 and 51% in 2005. The BET-FI (financials index) has registered staggering growth of 116% in 2004 and 175% in 2005.

Economic sectors: Other services


Romania has substantial natural and cultural resources exploitable for tourism, including medieval castles in Transylvania; painted monasteries in north-eastern Bucovina; the traditional culture of northern Maramures; beach holidays at the Black Sea coast; nature trips and river cruises in the Danube Delta, the largest wetland reservation in Europe; and skiing and spas in the Transylvanian mountains. However, underdeveloped infrastructure and the poor quality of hotel facilities have hampered growth of the industry.

The hotel industry is now fully privatised and investment in hotel facilities, including refurbishment, reached €390m (US$4804m) in 2004. Some 120 new hotels were opened in 2004 and 50 others were modernised. Of the 2.5m tourists who visited Romania in the first half of 2005, 1.9m, or almost 80%, chose to stay in hotels. Some 82,000 stayed in villas, 64,000 in rural boarding houses, 55,000 in youth hostels and 25,000 in chalets.

Some of the leading international hotel chains have been present in Bucharest, the capital, since the mid-1990s and foreign ownership of the industry is growing, although it is still relatively low. Large hotel chains—such as the Marriott (US), Hilton (UK), the Sofitel and Ibis chains run by Accor (France), and Holiday Inn, part of InterContinental—have invested heavily in Romania. However, four- and five-star hotels account for a very small percentage of rooms, with two- or three-star hotels accounting for 58% of the total and one-star and unclassified hotels comprising 39%.

Romania's US dollar earnings from international tourism grew by an estimated 48% in 2005, to US$1.05bn, according to balance-of-payments data from the National Bank of Romania (NBR). This figure does not include ancillary expenditure by tourists, which brought total tourism receipts of an estimated US$1.3bn. However, this is substantially lower than tourism earnings in neighbouring Bulgaria or Hungary, which exceed US$2bn and US$3bn, respectively. Approximately 6.6m tourists visited Romania in 2004, a rise of 18% compared with 2003. The government has set a target of doubling tourism revenue between 2005 and 2008 through a programme of diversification of tourist attractions and promotions in Europe and the US. Representatives of the tourism industry are demanding a more comprehensive approach, that recognises weaknesses in infrastructure and the shortage of personnel trained in the hospitality industry.

Retail sector

Romanian retail sales grew rapidly in 2004 and 2005 after falling in 1999-2000 and showing only modest growth over 2000-03. The expansion has been stimulated on the demand side by the rise in real wages and the rapid growth of consumer credit, and, on the supply side, by the rapid development of shopping malls and retail outlets. Total retail sales (excluding vehicles, repairs and petroleum) grew by 17.6% year on year in 2005, following growth of 12.3% in 2004. Growth sectors include furniture, lighting and electronic appliances; pharmaceutical and medical products; and cosmetics and toiletries. Sales and maintenance of motor vehicles rose by 40% year on year in 2005 and sales of motor fuels rose by 18.3%.

The pattern of retail activity differs sharply between Bucharest and the rest of the country. Although new shopping malls and out-of-town hypermarkets are opening in Bucharest, elsewhere in Romania the retail sector is still dominated by small, family-owned outlets, kiosks, street vendors and open markets. In a survey in 2004, 51% of those polled said that they preferred to buy consumer products from small stores. These attitudes contrast with other countries in central and eastern Europe, such as the Czech Republic and Hungary, where consumers prefer hypermarkets and large discount stores. Only 15% of Romanians said that they preferred to shop in supermarkets, with 4% preferring hypermarkets.

These attitudes are likely to change in coming years as the retail sector is transformed. The return to growth in recent years has already been accompanied by a rapid expansion and modernisation of the retail sector, involving large foreign companies. Foreign food retailers such as Metro and Selgros (both of Germany), Carrefour and Louis Delhaize (France) and Tesco (UK) have entered the market and spread beyond Bucharest to provincial towns with populations of more than 300,000, and are beginning to expand into smaller towns. In Bucharest, almost 25% of total expenditure on fast-moving consumer goods (FMCGs) is made in supermarkets, hypermarkets, discount retailers and cash-and-carry stores. However, the retail structure is still underdeveloped compared with central European countries like Hungary, where such outlets account for almost 50% of total FMCG expenditure.

The external sector: Trade in goods

Foreign trade
(€ m; fob)
  2004 2005
Exports of goods 18,935 22,255
Imports of goods 24,258 30,061
Trade balance -5,323 -7,806
Source: National Bank of Romania.

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Romania's economic development in the 1990s was hindered by its limited exposure to foreign markets at the end of the communist era. As result it was far less successful than the east-central European economies in attracting foreign direct investment (FDI) for industrial modernisation geared towards export markets. Export growth was slower than that of the east-central European economies, contributing to significant trade deficits throughout the decade.

Import substitution is poor

Current-account deficits have continued to exceed inflows of FDI and equity investment in the past five years, contributing to growing external indebtedness. Visible trade deficits in 2000-05 did not simply reflect high levels of imports of capital goods for industrial restructuring and modernisation, but also high levels of imports of minerals and intermediate goods, particularly for outward-processing. This has been augmented since mid-2003 by a surge in imports of consumer goods, especially automobiles, fuelled by the rapid expansion of consumer credit, as domestic industry has been unable to meet the growth in demand.

The slow pace of industrial restructuring has left Romania with a narrow export base, which has traditionally been dependent on low value-added goods that are labour- and resource-intensive, including energy and ferrous and non-ferrous metals. Romania's staple exports of clothing and textiles have been badly affected by growing competition from developing economies (especially China). As a result, exports of clothing and textiles declined by 0.1% in 2005 and, together with exports of footwear, accounted for only 24.8% of total exports compared with 33.6% in 2003. This has had a knock-on effect on imports of cloth used in outward-processing agreements.

Exports of engineering products are slowly starting to replace traditional exports. Exports of machinery and equipment (including audio-visual equipment) grew by 32.7% year on year in 2004, but growth slowed to 18.6% in 2005. A notable success story has been the growth of exports of transport equipment (largely consisting of cars), which rose by 34.1% in 2004 and by 47.5% in 2005. These were led by exports of the Dacia Logan model, which has benefited from large-scale investment in modernisation by Renault.

Low levels of FDI in the industrial sector have also resulted in the slow development of import-substituting industries. Imports of machinery and equipment grew substantially faster than total imports in 2002-03, before levelling out in 2004 and 2005, when they accounted for 23.4% of total imports. However, this compares with a ratio of more than 50% in neighbouring Hungary, and Romanian imports of machinery and equipment are about 10% of the Hungarian level on a per-head basis.

The rise in real wages and the surge in consumer credit in 2003-05 have increased demand for imported consumer goods, which cannot be met by domestic production. Imports of motor vehicles, which rose by an estimated 80% in euro terms in 2004, experienced extremely strong growth in 2005 as well. Romania's dependence on imported materials and energy, which largely results from the high level of wastage in unrestructured utilities and the continued subsidisation of loss-making, energy-intensive enterprises, means that the trade balance is vulnerable to world energy prices. High world energy prices pushed up the fob-cif deficit on trade in mineral products to €2.6bn (US$3.2bn) in 2005 and were a prominent factor in the growth of the trade deficit.

The EU is the main market

Although the enlarged EU remains an important market for Romanian exports, exports to the EU grew by less than 10% in 2005, compared with an overall growth of exports of more than 17%. This largely reflected the stagnation of clothing exports (which went mainly to the EU), following the ending of the Multi-fibre Agreement (MFA), and the growth of exports of passenger cars, which are concentrated on non-EU countries. As a result the share of the EU25 in total exports fell from 73% in 2004 to 68% in 2005. Italy remained Romania's largest market, accounting for 19.5% of exports, followed by Germany with 14%. Romania's association agreement with the EU, which came into force in 1995, liberalised Romanian exports of manufactures by 1997. Consequently, exclusion from the first wave of EU enlargement in 2004 has not affected Romanian exports of manufactures directly. Furthermore, the enlargement of the EU in May 2004 has contributed to a more liberal regime for Romanian exports to the central European economies that joined the EU.

The EU25 accounted for an estimated 63% of Romanian imports in 2005 (down from 65% in 2004) and is the leading source of imports of machinery and equipment, and textile materials for outward-processing. The main European suppliers are Italy (providing 16% of imports) and Germany (14%). Russia, which is Romania’s main supplier of oil and gas, edged ahead of France into third place, providing 8% of imports, largely as a result of increased world energy prices. Romania is highly dependent on Russian supplies of natural gas that transit through Ukraine. Romania is trying to improve trade relations with other states in the Black Sea region. The port of Constanta is already benefiting from increasing trade with neighbouring states, and is undertaking major investments in oil and grain storage.

The external sector: Invisibles and the current account

Current-account in deficit

Romania experienced severe problems in containing its current-account deficits throughout the 1990s, largely as a result of persistent deficits in merchandise trade. These were aggravated by deficits in trade in invisibles, which reflected interest payments on external debt and deficits in trade in services. Economic recovery since 2000 has been accompanied by growing deficits in merchandise trade resulting from rising deficits in trade in machinery and equipment, transport, and fuel and energy. These have been partially offset by surpluses in current transfers from workers' remittances sent from abroad. Inflows from current transfers reached €4.1bn in 2005, when they were equivalent to 18.6% of merchandise exports. The current-account deficit reached €5.1bn in 2004, equivalent to 7.6% of GDP, and €6.9bn in 2005, equivalent to more than 9% of GDP.

Current account
(€ m)
  2004 2005
Exports fob 18,935 22,255
Imports fob 24,258 30,061
Trade balance -5,323 -7,806
Services credit 2,903 3,931
Services debit 3,116 4,365
Services balance -213 -434
Income credit 329 1,313
Income debit 2,864 3,622
Income balance -2,535 -2,309
Current transfers credit 3,366 4,141
Current transfers debit 394 483
Current transfers balance 2,972 3,658
Current-account balance -5,099 -6,891
Source: National Bank of Romania.

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The external sector: Capital flows and foreign debt

The foreign debt has risen sharply

Owing to the debt repayment programme of the 1980s, which was undertaken at considerable cost to the population, almost all of Romania's sovereign borrowings had been repaid by 1989. However, growing external deficits in the 1990s resulted in a new build-up of external debt. Although servicing this debt came close to crisis in mid-1999, when two large bonds fell due, the National Bank of Romania (NBR, the central bank) has subsequently succeeded in meeting principal repayments without any difficulty. It has pursued a policy of long-term borrowing to build up its foreign-exchange reserves since the end of 2000. This has contributed to an increase in medium- and long-term foreign debt from €11bn at the end of 2000 to an estimated €28.3bn at the end of 2005. The Economist Intelligence Unit estimates that gross foreign debt reached US$34.5bn at the end of 2005 equivalent to 37.3% of GDP.

Romania's sovereign ratings have improved

Romania was heavily dependent on credits from the multilateral institutions to finance external debt in the early 1990s. Although it re-entered private capital markets in 1995 after a 15-year absence, the combination of financial crises in Asia and Russia, together with domestic instability, contributed to a fall-off in foreign investment in 1999. Romania re-appeared in international capital markets in September 2000, and has subsequently launched a series of Eurobond issues and syndicated loans. Romania’s sovereign ratings have consistently improved since 2000, allowing it to borrow over longer periods with a reduced premium over west European rates. Capital-account liberalisation in 2005 has led to significant inflows of foreign investment.

FDI inflows are picking up

Romania's FDI inflows in the 1990s and the early part of the current decade lagged far behind potential and were dwarfed by the amount absorbed by leading transition economies. Cumulative FDI inflows between 1989 and 2003 amounted to US$10.5bn, equivalent to US$486 per head, compared with US$33.6bn and US$3,364 per head in neighbouring Hungary, and an average of US$2,122 per head in east-central Europe and the Baltic states. FDI inflows averaged just over US$1bn per annum from 1999-2002, with a small pick up to US$2.2bn in 2003. Inflows surged to US$5.4bn in 2004 (US$232 per head), equivalent to 7.5% of GDP, largely as a result of income from privatisations. In the absence of any large privatisations in 2005, FDI inflows nevertheless reached an estimated US$6.2bn, reflecting a sharp pick-up in greenfield investment and in reinvestment. Several large privatisations, including that of Banca Comerciala Romana (BCR), will result in significant inflows in 2006.

The external sector: Foreign reserves and the exchange rate

Foreign-exchange reserves have risen

Although Romania's exchange rate was officially unified in November 1991, controls over the interbank market resulted in wide divergences between kiosk market rates of exchange and the official interbank rate. The exchange rate was reunified in January 1997, and full current-account convertibility was introduced in 1998. Full capital-account convertibility was introduced in 2005 to comply with the acquis communautaire (the body of EU law) on monetary policy and in preparation for joining European economic and monetary union (EMU).

Since 1996 the NBR has liberalised the foreign-exchange regime and built up foreign-exchange reserves, despite continuing current-account deficits, pressure on the leu and high levels of foreign debt repayments. The NBR has used international capital markets, multilateral institutions and purchases from the domestic foreign-exchange market to build up its own foreign-exchange reserves. Although the NBR announced that it would not intervene in the foreign-exchange market in 2005 as part of the shift to inflation-targeting, it continued to purchase foreign currency from the domestic market in the face of large-scale capital inflows. Purchases of foreign-exchange and privatisation receipts drove its reserves up to €16.8bn at the end of 2005, in addition to gold stocks worth €1.5bn.

The real exchange rate has fluctuated

From 1999 until mid-2005 the NBR pursued a managed float of the exchange rate, which allowed for a gradual real appreciation of the leu against a currency basket, provided that competitiveness was not impaired. The NBR signalled a shift towards a more flexible exchange-rate policy in October 2004 and announced that it would limit its intervention in the foreign-exchange market. In August 2005 the NBR formally announced the introduction of inflation-targeting in place of a managed float.

The shift in monetary policy towards reduced intervention in foreign-exchange markets contributed to a nominal appreciation of the leu against the US dollar. In 2004 the leu appreciated in nominal terms by 1.2% against the US dollar, by 3.7% against the euro and by over 16% in real terms against the currency basket. In 2005 the leu appreciated by 6.9% against the euro, but depreciated by 6.6% against the US dollar, resulting in real appreciation against the euro of 16%. Although this will make it easier for Romania to meet its inflation targets, the appreciation of the leu raises important questions about the competitiveness of Romania's exports to EU markets.

Regional overview: Membership of organisations

Central European Free-Trade Agreement

The Central European Free-Trade Agreement (CEFTA) was signed in December 1992 by Hungary, Poland, the Czech Republic and Slovakia. They were joined by Slovenia in 1996, Romania in 1997, Bulgaria in 1999; Croatia in 2003; and Macedonia in 2005. The initial impetus for setting up CEFTA was to counteract the collapse in inter-regional trade after the Council for Mutual Economic Assistance (Comecon) trading system was abolished. The signatories committed themselves to the “gradual introduction of a free-trade area”.

Trade in industrial products among CEFTA members, a market of almost 90m people, was fully liberalised on January 1st 2000, with the exception of the export of cars to Poland, which was liberalised on January 1st 2002. However, trade in agricultural goods remains subject to barriers, which in some cases have been increased. The significance of CEFTA, which has been successful in its aim of restoring trade links severed in the early 1990s and promoting European integration, has declined since May 2004, when five of its members—Hungary, Poland, the Czech Republic, Slovakia and Slovenia—joined the EU. However, liberalisation of agricultural sector trade is still a priority for the remaining members.

European Bank for Reconstruction and Development

The European Bank for Reconstruction and Development (EBRD) was set up in 1991 to help finance the development of central and eastern Europe after the fall of communism. By contrast with most other multilateral organisations involved in the region, the EBRD’s mandate compelled it to focus on the private sector, as it was allowed to commit no more than 40% of its funds to public-sector projects. It received an initial capital of Ecu10bn (US$12bn at 1991 average exchange rates), which was doubled in 1997. The EBRD initially found it difficult to carve out a niche for itself, and was in its early years beset by scandals and a leadership crisis. Although it recovered from these, in 1998 the Russian financial crisis resulted in heavy losses for the Bank. Russia has been the EBRD’s largest client, accounting for about one-fifth of all funding in 1991-2004.

Over the past 15 years the EBRD has invested substantial sums in the region and has helped to encourage private-sector investors. The EBRD’s clientele has grown from just a handful of transition countries in the early 1990s to 27 countries today. The EBRD has funded hundreds of projects, ranging from bank privatisation to road-building. By 2000 it had recovered from its 1998 losses, and by the end of that year had disbursed €12.1bn (US$11.5bn). Disbursements rose strongly in 2001-02, at an annual average of €2.4bn, falling slightly to €2.1bn in 2003, although the decline was attributable in large part to the weakening US dollar. In 2004 disbursements rose to a record €3.4bn—up by 60% year on year. The bank’s commitments have also risen robustly since 2000, up from €2.67bn in 2000 to €4.1bn in 2004. This reflects the increase in the number of viable investments across the transition region, as well as the bank’s efforts to develop new business. If co-financing from other lenders and the private sector is added, in 1991-2004 the EBRD was involved in projects worth a total of €78.5bn.

Funding of the eight east European EU new member states has remained roughly constant following their entry to the EU in May 2004, at around €1bn per year, but most new business is now being directed to south-eastern Europe, the Caucasus and Central Asia. These three regions accounted for 47% of investment in new projects in 2004. Business was also strong in Russia, which received 30% of new investment in that year. In 2004 the EBRD launched the Early Transition Countries Initiative (ETCI), which focuses on lending to Armenia, Azerbaijan, Georgia, the Kyrgyz Republic, Moldova, Tajikistan and Uzbekistan—countries where the transition from centrally planned to market economy has been slowest. Total investment in these countries under the ECTI rose from €84m in 2003 to €378m in 2004.


In April 1949, as post-war relations between the West and the Soviet Union worsened, ten west European countries—Belgium, Denmark, France, the UK, Iceland, Italy, Luxembourg, the Netherlands, Norway and Portugal—plus the US and Canada formed the North Atlantic Treaty Organisation (NATO), a political and military alliance with a commitment to mutual defence in the event of attack against any of its members (Article 5 of the North Atlantic Treaty).

Since its establishment the Alliance, which now has its headquarters in Brussels, has been expanded five times, bringing the current number of members to 26. In 1952 Turkey and Greece joined; in 1955 West Germany and in 1982 Spain. In 1999, after the collapse of the Soviet Union, NATO admitted three central and east European countries, Poland, Hungary and the Czech Republic. In November 2002 seven more—Bulgaria, Estonia, Latvia, Lithuania, Romania, Slovakia and Slovenia—were invited to join and their accession took place at the end of March 2004. The Alliance is open to further expansion.

After the end of the Cold War at the end of the 1980s the Alliance had to undergo a major transformation to justify its continued existence. From being an alliance between countries with a common enemy, it increasingly focused on international crisis management and peacekeeping. In 1994 NATO established a Partnership for Peace programme with other countries intended to foster co-operation with non-member states.

In the post-cold war period NATO has undertaken several controversial military operations in the Balkans, particularly air strikes in Bosnia in 1995 and against Yugoslavia over Kosovo in 1999. The 1999 air strikes were carried out without UN approval. In the aftermath of both conflicts NATO has been heavily involved in peacekeeping in Bosnia and Kosovo and Macedonia (the latter being transferred to the EU, still using NATO assets, in March 2003), and it is working closely with the EU in the western Balkans as a whole.

Following the September 11th 2001 terrorist attacks on the US the then NATO secretary-general, George Robertson, invoked Article 5 of the North Atlantic Treaty. The US did not involve NATO in the US-led military campaign in Afghanistan which followed, but NATO has taken over the management of the International Security and Assistance Force (ISAF) as from August 11th 2003. NATO countries were sharply divided over the US-led attack on Iraq in March-April 2003.


Since May 1st 2004 the EU has comprised 25 member states: Austria, Belgium, the Czech Republic, Cyprus, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Poland, Portugal, Slovakia, Slovenia, Spain, Sweden and the UK.

The framework

According to the 1992 Treaty on European Union, the European Community (EC) forms the first of the three pillars that make up the EU, along with the Common Foreign and Security Policy (CFSP) and co-operation in the field of Justice and Home Affairs (JHA). The CFSP is inter-governmental. It is co-ordinated by the member states' high representative for the CFSP. JHA is partly inter-governmental.

The treaties

The European Coal and Steel Community (ECSC) was set up by the Treaty of Paris, signed on April 18th 1951, to pool the coal, iron and steel resources of the six original member states: Belgium, France, the Federal Republic of Germany, Italy, Luxembourg and the Netherlands. In March 1957 the six founding members of the ECSC signed the Treaty of Rome, establishing the European Economic Community (EEC). Its immediate aims were to achieve a customs union and common market in goods and services. The European Atomic Energy Community (Euratom), was set up at the same time to develop the peaceful use of nuclear energy, but has proved of lesser importance. The 1987 Single European Act (SEA) was a major step in the evolution of the EC—as the above three communities were jointly known—by sanctioning qualified majority voting (QMV) for directives and regulations to liberalise the movement of goods, services, capital and people.

The Treaty on European Union (Treaty of Maastricht) established the EU in its present form, and committed its members, with the exception of the UK and Denmark, to economic and monetary union (EMU). It came into effect in November 1993. The Treaty of Amsterdam, which took effect in May 1999, incorporated the Schengen agreement to abolish frontiers between all member states other than the UK and Ireland. The Treaty of Nice, signed in February 2001 and taking effect in February 2003, dealt with three issues linked to prospective enlargement: the number of commissioners, the reweighting of votes and the extension of majority voting.

In October 2004 the EU heads of government signed a proposed new constitutional treaty which, if ratified, would have replaced all the above treaties. However, following its defeat in two referendums, in France on May 29th, 2005 and in the Netherlands on June 1st, it is extremely unlikely to come into effect. For the near term, at least, the EU will continue to work under the existing treaties.


The European Council is the regular meeting of heads of state or government and the president of the Commission; it takes place three to four times a year. It has no direct legislative powers but sets the guidelines for policy.

The Commission consists of a college of commissioners and a civil service of about 23,000. There are 25 commissioners—one from each member state—meant to be independent of their national governments. The Commission's staff is organised into directorates-general for specific policy areas, and various other agencies and services. The Commission oversees the enforcement of legislation, although it has no police powers. It has sole responsibility for drafting legislation, but its drafts can be amended by the Council of Ministers and Parliament. Its executive powers are limited, consisting primarily of competition policy (subject to appeal to the Court of Justice), regional policy and agriculture. It is responsible for administering a budget, limited to 1.24% of EU gross national income (GNI) and currently amounting to about 1% of GNI.

The Council of Ministers directly represents the member governments. On some issues the Council functions as an executive, on others it functions as one branch of the legislature, the other being the European Parliament. Some legislation requires unanimity, but the majority of legislation governing the internal market, as well as some environmental, social and other legislation, is by QMV. The votes of each country are weighted according to its size, but with smaller countries receiving a bigger weighting than larger countries in relation to their populations.

The European Parliament, which has 732 members, is directly elected for a five-year term. It has powers of co-decision with the Council on most legislation that is voted on by QMV. It must also ratify all external agreements.

The European Court of Justice consists of 25 judges, one from each member state, who decide whether acts of the Commission, the Council, member governments and other bodies are compatible with the treaties. The European Court of Auditors has recently stepped up its role as a severe critic of financial management.

Economic and monetary union (EMU)

In January 1999 11 member states—Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Portugal and Spain—formed an economic and monetary union (EMU), with the euro as a single currency and a common monetary policy conducted by the European Central Bank (ECB). Euro notes and coins replaced national currencies in early 2002. Greece became the 12th member of EMU in 2001. Denmark rejected EMU membership in a referendum in 2000, as did Sweden in 2003, while the UK is keeping its options open. All ten new member states are committed to joining EMU. Some could do so as early as 2007.


In addition to the six original members of the EC, Denmark, Ireland and the UK joined in January 1973. Greece became the tenth member in January 1981. Portugal and Spain joined in January 1986. Austria, Finland and Sweden became members of what was by then the EU in January 1995. In June 1993 the Copenhagen European Council decided that the central and east European countries (CEECs) could apply to join the EU. In May 2004 Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia and Slovenia joined the EU.

Negotiations with Bulgaria and Romania were concluded in June and December 2004, respectively, with a 2007 target date for accession. Negotiations with Croatia began in 2005 after some delay caused by non-compliance with International Criminal Tribunal for former Yugoslavia (ICTY) in The Hague. Turkey was given full candidate status at the Helsinki European Council of December 1999. In December 2004 the European Council set October 3rd 2005 as the date to start negotiations with that country. Progress is likely to be slow and Turkey’s earliest possible date for accession is 2015. Macedonia was granted candidate status in December 2005, but no date has been set for the start of accession negotiations.

The EEA and Switzerland

The European Economic Area (EEA) consists of the 25 members of the EU, plus three members of the European Free-Trade Association (EFTA), Norway, Iceland and Liechtenstein. It enables the latter to participate in most aspects of the single market, with the notable exceptions of agriculture and primary energy. Switzerland is also a member of EFTA, but not the EEA. Economic relations between the EU and Switzerland have been made closer by seven bilateral agreements which came into force in 2002. A second package of agreements was ratified in June 2005.

The Mediterranean

The EU has association agreements in force with Algeria, Egypt, Israel, Jordan, Lebanon, Morocco, the Palestinian Authority and Tunisia. One has been signed but not yet ratified with Syria, and Libya is also foreseen as part of a Mediterranean free-trade area by 2010.

Stability and Association Process

In June 1999 the EU launched the Stability and Association Process for south-eastern Europe—Albania, Bosnia and Hercegovina, Croatia, Macedonia and Serbia and Montenegro. This provides for the negotiation of bilateral Stability and Association Agreements as a first step towards these countries’ eventual accession into the EU.


There are partnership and co-operation agreements (PCAs) in force with all former Soviet countries except Belarus and Turkmenistan. In May 2004 the European Commission adopted a strategy paper outlining the scope and objectives of a new European Neighbourhood Policy (ENP), aimed at strengthening ties with those countries that form the borders of the newly enlarged EU—although Russia has been excluded at its own request.

Organisation for Security and Cooperation in Europe

Initially a non-institutionalised multilateral forum for cold war East-West dialogue, the Conference for Security and Co-operation in Europe (CSCE) gradually expanded in aim and strengthened its organisational structure in the 1990s. Established in 1972, the CSCE served for almost 20 years as a convenient and flexible arrangement for easing cold war tensions. After the end of the cold war the role of the CSCE started to change quickly, and in December 1994 the conference was officially renamed the Organisation for Security and Co-operation in Europe (OSCE). With 55 member states, the OSCE is the only inclusive pan-European security organisation. Canada and the US are also members of the organisation.

The OSCE has played a key role in conflict prevention and resolution, as well as post-conflict reconstruction in Europe. Its activities embrace three dimensions: security, economy, and human rights. The OSCE is engaged in preventive diplomacy, arms control and confidence-building activities. It undertakes fact-finding and conciliation missions, and crisis management. The OSCE is a component of the European security architecture. It is a “regional arrangement” in the sense of Chapter VIII of the UN Charter, which gives it authority to try to resolve a conflict in the region before referring it to the UN Security Council. Since the early 1990s the OSCE has been heavily involved in the Balkans and the Transcaucasus.

The activities of the OSCE are performed by a web of specialised agencies. The High Commissioner on National Minorities, based in The Hague, is the primary source of “early warning”, with responsibility for identifying ethnic tensions that might endanger peace. The Office for Democratic Institutions and Human Rights (ODIHR), based in Warsaw, focuses on promoting human rights, democracy and the rule of law. It monitors elections, assists at developing national electoral and legal institutions, promotes the development of non-governmental organisations (NGOs) and civil society, conducts meetings, seminars and special projects. The Office of the Representative on Freedom of the Media, based in Vienna, assesses the implementation of the member states’ commitments concerning freedom of journalism, broadcasting and access to information.

Appendices: Sources of information

National statistical sources

The main source of non-monetary statistics on the Romanian economy is the National Institute of Statistics (INSSE). Fairly up-to-date information is available in its monthly and quarterly statistical bulletins. Its yearbook, which resembled a pamphlet in the secretive Ceausescu days, has expanded into a 1,000-page volume with detailed data on most economic areas. As elsewhere in the region, there are problems in registering private-sector data adequately, and the most serious difficulties are encountered in the recording of foreign trade transactions. Constructing a consistent series of annual constant and current-price GDP accounts continues to pose difficulty, despite some progress (the provision of full quarterly data is still some way off). Data on foreign trade and the balance of payments have been subject to frequent revision, and measures are being implemented to harmonise the system with EU requirements.

The National Bank of Romania (NBR, the central bank) publishes annual and monthly reports and bulletins with fairly timely information on domestic and external finances, as well as key domestic indicators taken from the INSSE.

International statistical sources

The IMF, the World Bank, the European Bank for Reconstruction and Development (EBRD) and the OECD are the main international providers of statistics on the Romanian economy, although their data tend to lag behind national sources.

European Bank for Reconstruction and Development (EBRD), Transition Report

IMF, International Financial Statistics; Direction of Trade Statistics, Country Reports

OECD, Economic Surveys, 2000, 2002

UN, Energy Statistics Yearbook

UN Food and Agriculture Organisation, Production Yearbook

World Bank, Global Development Finance; Trends in Developing Economies; World Tables

Select bibliography and websites

Daniel Daianu, Transformation of Economy as a Real Process, Aldershot, Ashgate, 1998

Dennis Deletant, Ceausescu and the Securitate, London, C Hurst, 1996. Comprehensive analysis of the role of the Securitate in Romanian politics

EU website: http://europa.eu.int/comm/enlargement/romania/ provides the full text of the European Commission's annual report on Romania's progress towards accession

Tom Gallagher, Theft of a Nation: Romania since communism, London, Hurst & Company, 2005. Analysis of political forces in the post-Ceausescu period

Trond Gilberg, Nationalism and Communism in Romania, Boulder, Colorado, Westview Press, 1990. Sober work by leading US social development specialist.

Duncan Light and David Phinnemore (eds), Post-Communist Romania, 2001. Palgrave. Covers the first decade of the transition to a market and a democracy in Romania, with contributions by English and Romanian specialists.

Mediafax news agency website: http://www.mediafax.ro provides topline news summaries in Romanian and English, although more Mediafax stories can be found via the news button at http://www.RomaniaByNET.com

National Institute of Statistics website: http://www.insse.ro provides a large selection of data that are reasonably up to date. A larger selection of data can be found at the Ministry of Finance website: http://www.mfinante.ro, and the National Bank of Romania website: http//www.bnro.ro.

Daniel N Nelson (ed), Romania After Tyranny, Boulder, Colorado, Westview Press, 1992. A useful compilation of articles on the economics and politics of Romania in the immediate aftermath of the overthrow of Ceausescu, edited by one of the foremost US academic specialists on Romania

Alina Mungiu-Pippidi (ed), Romania after 2000. Threats and Challenges. Annual Early Warning Report Romania 2001, 2002. Available on the websites of the United Nations Development Programme for Romania: http//www.undp.ro, and the Romanian Academic Society: http//sar.euroweb.ro. Both websites are also useful sources of information and analysis.

Reference tables: Population

  2000 2001 2002 2003 2004
Population (m) 22.44 22.41 21.79 21.73 21.67
 % change, year on year -0.10 -0.18 -2.77 -0.28 -0.28
Birth rate per ‘000 population 10.4 9.8 9.7 9.8 10.0
Death rate per ‘000 population 11.4 11.6 12.4 12.3 11.9
Rate of natural increase (incl net migration) per ‘000 population -1.1 -1.8 -2.7 -2.5 -1.9
Sources: National Institute of Statistics.

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Reference tables: Labour force and unemployment

Labour force and unemployment
  2000   2001   2002a   2003   2004  
  ‘000 % of total ‘000 % of total ‘000 % of total ‘000 % of total ‘000 % of total
Agriculture & forestry 3,570 41.4 4,527 38.0 3,361 41.2 3,292 41.4 2,896 40.9
Industryb 2,004 23.2 2,374 26.3 2,311 24.4 2,324 23.2 2,378 23.6
Construction 353 4.1 430 4.4 413 4.0 426 4.1 479 4.0
Services 2,702 31.3 3,366 31.2 3,149 30.4 3,181 31.3 3,405 31.6
Total employed 8,629 100.0 10,697 100.0 9,234 100.0 9,223 100.0 9,158 100.0
Unemployment 1,007 10.5c 827 7.2c 761 7.6c 659 6.7c 558 6.1c
a Data from 2001 are not comparable with data series from previous years. From 2002, data have been weighted based on the results of the Population and Housing Census, March 18th 2002. b Mining, manufacturing and utilities. c Percentage of total labour force.
Source: National Institute of Statistics, Romanian Statistical Yearbook.

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Reference tables: Production and trade in energy

Production and trade in energy
('000 tonnes oil equivalent unless otherwise indicated)
  2000 2001 2002 2003 2004
Crude oil 6.2 6.1 6.0 5.8 5.6
Natural gas 11.0 10.9 10.4 10.5 10.4
Coal 5.6 6.2 6.1 6.5 6.3
Electricity (bn kwh) 51.9 53.9 54.9 56.6 57.0
 Thermal 31.7 33.5 33.4 38.5 34.5
 Hydro 14.8 14.9 16.0 13.2 17.0
Oil 4.8 5.5 6.4 5.2 7.3
Hard coal 1.7 1.9 2.4 2.1 2.4
Coke 0.2 0.4 n/a n/a n/a
Electricity (bn kwh) 0.1 0.1 0.1 0.1 0.2
Natural gas (bn cu metres) 2.7 2.3 3.0 4.7 4.1
Sources: National Commission for Statistics, Romanian Statistical Yearbook; Monthly Statistical Bulletin; UN, Energy Statistics Yearbook.

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Reference tables: Government finances

Government finances
(Lei bn unless otherwise indicated)
  2000 2001 2002 2003 2004
Consolidated budget revenue 25.1 35.2 44.9 56.7 70.7
 Central state budget 12.0 14.8 17.9 25.2 32.1
 Local budget 34.0 7.1 9.3 12.8 15.9
 Social insurance fund 5.1 7.6 9.7 12.5 16.1
Consolidated budget expenditure 28.3 38.9 48.8 61.1 73.4
 Central state budget 15.6 18.4 22.7 28.1 34.1
 Local budget 3.3 7.1 9.3 12.8 15.5
 Social insurance fund 5.6 8.3 10.7 12.4 16.1
Consolidated budget balance -3.2 -3.8 -3.9 -4.4 -2.7
 % of GDP -4.0 -3.2 -3.6 -2.3 -1.1
Central state budget balance -3.5 -3.6 -4.8 -2.9 -1.9
 % of GDP -3.6 -3.7 -3.1 -1.5 -0.8
Sources: National Commission for Statistics, Romanian Statistical Yearbook; National Bank of Romania.

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Reference tables: Money supply

Money supply
(Lei bn unless otherwise indicated; end-period)
  2001 2002 2003 2004 2005
Money (M1) incl others 6.2 8.4 10.8 14.4 20.6
 % change, year on year 39.1 36.2 28.2 34.2 42.7
Quasi-money 20.9 29.0 35.3 50.0 69.2
Money (M2) 27.1 37.4 46.1 64.5 89.8
 % change, year on year 46.2 38.2 23.3 39.9 39.3
Source: IMF, International Financial Statistics.

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Reference tables: Interest rates

Interest rates
(%; period averages unless otherwise indicated)
  2001 2002 2003 2004 2005
Lending interest rate (%) 45.4 35.4 25.4 25.8 19.6
Deposit interest rate (%) 26.6 19.1 10.8 11.4 6.2
Money market interest rate (%) 42.2 27.0 16.2 18.0 8.3
Sources: National Bank of Romania, Monthly Bulletin.

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Reference tables: Gross domestic product

Gross domestic product
(market prices)
  2000 2001 2002 2003 2004
Total (US$ bn)
At current prices 37.1 40.2 45.8 57.3 73.2
Total (Lei bn)
At current prices 80 117 151 190 239
At constant (2002) prices 136.3 144.1 151.4 159.3 172.5
 % change, year on year 2.1 5.7 5.1 5.2 8.3
Per head (Lei m)
At current prices 3,582 5,203 6,950 8,757 11,004
At constant (2002) prices 6,073 6,419 6,947 7,328 7,949
 % change, year on year 2.2 5.7 8.2 5.5 8.5
Source: National Institute of Statistics.

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Reference tables: Nominal gross domestic product by expenditure

Nominal gross domestic product by expenditure
(Lei bn at current prices; % of total in brackets)
  2000 2001 2002 2003 2004
Private consumption 56 82 104 131 168
  (70.1) (70.0) (69.0) (68.9) (70.4)
Government consumption 13 18 23 30 38
  (16.1) (15.2) (15.1) (16.0) (15.9)
Gross fixed investment 15 24 32 42 53
  (18.9) (20.7) (21.3) (22.2) (22.3)
Stockbuilding 0 2 1 1 2
  (0.6) (1.9) (0.4) (0.7) (0.8)
Exports of goods & services 26 39 54 69 89
  (32.9) (33.3) (35.4) (36.0) (37.1)
Imports of goods & services 31 48 62 83 111
  (38.5) (41.1) (41.1) (43.8) (46.4)
GDP 80 117 151 190 239
Source: National Institute of Statistics.

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Reference tables: Real gross domestic product by expenditure

Real gross domestic product by expenditure
(Lei bn at constant 2002 prices; % change year on year in brackets)
  2000 2001 2002 2003 2004
Private consumption 105.0 111.6 115.1 123.4 136.8
  (-0.8) (6.3) (3.2) (7.2) (10.8)
Government consumption 8.6 9.0 9.2 9.6 10.1
  (12.3) (4.7) (2.4) (4.6) (4.6)
Gross fixed investment 27.1 29.8 32.2 35.2 38.7
  (5.5) (10.1) (8.2) (9.1) (10.1)
Stockbuilding 0.2 3.3 3.3 2.9 3.3
  (2.2)a (2.3)a (0.0)a (-0.3)a (0.3)a
Exports of goods & services 40.7 45.6 53.7 59.8 68.3
  (23.4) (12.1) (17.7) (11.4) (14.1)
Imports of goods & services 47.0 55.6 62.3 72.5 85.4
  (27.1) (18.4) (12.0) (16.4) (17.8)
GDP 136.3 144.1 151.4 159.3 172.5
  (2.1) (5.7) (5.1) (5.2) (8.3)
a Change as a percentage of GDP in the previous year.
Source: National Institute of Statistics.

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Reference tables: Gross domestic product by sector

Gross domestic product by sector
(% of GDP; current prices)
  2000 2001 2002 2003 2004
Industry 27.3 28.2 29.1 28.4 27.0
Agriculture & forestry 11.1 13.3 11.7 11.7 13.0
Construction 4.9 4.9 5.0 5.7 6.1
Transport & communications 10.0 10.0 9.7 9.6 n/a
Trade incl hotels & restaurants 12.6 11.2 10.7 10.6 n/a
Net tax on product & customs duties 11.4 10.7 10.5 11.6 11.3
Sources: National Institute of Statistics, Romanian Statistical Yearbook; National Bank of Romania, Annual Report.

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Reference tables: Prices and earnings

Prices and earnings
(% change, year on year)
  2001 2002 2003 2004 2005
Consumer prices (av) 34.5 22.5 15.3 11.9 9.0
Average gross nominal wages 48.8 25.3 25.7 22.6 17.0
Average real wages 10.6 2.2 9.0 9.5 7.4
Unit labour costs -0.3 5.9 20.5 17.1 28.0
Source: National Institute of Statistics.

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Reference tables: Livestock output

Livestock output
  2000 2001 2002 2003 2004
Meat (‘000 tonnes) 1,414 1,415 1,604 1,699 1,550
Milk (‘000 hl) 51,630 53,169 55,146 57,800 60,011
Eggs (m) 5,711 6,001 6,432 6,641 7,489
Wool (‘000 tonnes) 18 17 17 17 18
Source: National Institute of Statistics, Romanian Statistical Yearbook.

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Reference tables: Metals production

Metals production
(‘000 tonnes)
  2000 2001 2002 2003 2004
Raw steel 4672.0 4935.0 5490.0 5693.0 6042.0
Aluminium & aluminium alloys 181.0 185.0 191.0 205.0 224.0
Copper 16.1 18.0 11.0 17.0 24.0
Lead 18.8 22.0 23.0 28.0 25.0
Zinc 27.5 48.0 38.0 51.0 53.0
Source: National Institute of Statistics, Romanian Statistical Yearbook.

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Reference tables: Industrial production indices

Industrial production indices
  2000 2001 2002 2003 2004
Total (unadjusted) 100.0 110.5 117.0 118.2 124.4
 % change, year on year 10.2 10.5 6.0 1.0 5.3
Total (adjusted for working days) 100.0 108.3 113.0 116.5 122.7
 % change, year on year 7.1 8.3 4.3 3.1 5.3
Sources: National Institute of Statistics, Romanian Statistical Yearbook; Monthly Statistical Bulletin.

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Reference tables: Production of selected industrial items

Production of selected industrial items
(‘000 tonnes unless otherwise indicated)
  2000 2001 2002 2003 2004
Crude steel 4,672 4,935 5,490 5,693 6,042
Cement 6,058 5,668 5,680 5,992 6,209
Plastic processed products 93 204 211 274 n/a
Tyres ('000 pieces) 3,226 3,672 7,109 11,136 12,505
Caustic soda 343 346 353 382 n/a
Passenger cars (‘000) 64 57 65 76 99
Television sets (‘000) 32 29 60 90 76
Washing machines (‘000) 25 24 29 35 42
Refrigerators (‘000) 341 313 390 522 706
Tractors (‘000) 5 5 6 4 5
Beer (‘000 hl) 12,664 12,683 11,627 13,292 n/a
Sources: National Institute of Statistics, Romanian Statistical Yearbook; Monthly Statistical Bulletin.

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Reference tables: Exports

(US$ m; fob; % of total in brackets)
  2001 2002 2003 2004 2005
Agriculture, food & beverages 433 434 563 729 758
  (3.8) (3.8) (3.2) (3.1) (2.7)
Minerals & fuels 784 1,177 1,229 1,689 3,056
  (6.9) (8.5) (7.0) (7.2) (11.0)
Chemical products 612 658 652 956 1,234
  (5.6) (4.9) (3.7) (4.1) (4.5)
Textiles & products 2,979 3,509 4,470 5,238 5,231
  (26.2) (25.3) (25.4) (22.3) (18.9)
Basic metals & products 1,516 1,789 2,278 3,625 4,088
  (13.3) (13.0) (12.9) (15.4) (14.7)
Machinery & equipment 1,680 2,172 2,827 4,122 4,887
  (14.8) (15.7) (16.0) (16.0) (17.6)
Total incl others 11,365 13,876 17,618 23,485 27,730
Sources: National Institute of Statistics.

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Reference tables: Imports

(US$ m; cif; % of total in brackets)
  2001 2002 2003 2004 2005
Agriculture, food & beverages 1,206 1,084 1,656 2,060 2,434
  (7.8) (6.6) (6.9) (6.3) (6.0)
Minerals & fuels 2,500 2,278 2,969 4,374 6,290
  (14.4) (12.8) (12.4) (13.4) (15.5)
Chemical products 1,218 1,502 1,906 2,584 3,021
  (7.8) (8.4) (7.9) (7.9) (7.5)
Textiles & products 2,237 2,928 3,568 4,112 4,132
  (16.1) (16.4) (14.9) (12.6) (10.2)
Basic metals & products 1,138 1,321 1,847 2,727 3,566
  (7.3) (7.4) (7.7) (8.4) (8.8)
Machinery & equipment 3,527 4,092 5,752 7,750 9,461
  (22.7) (22.9) (24.0) (23.7) (23.4)
Total incl others 15,512 17,857 24,003 32,664 40,463
Source: National Institute of Statistics.

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Reference tables: Main trading partners

Main trading partners
(% of total)
  2001 2002 2003 2004 2005
Exports fob to:
Italy 24.9 24.9 24.2 21.2 19.2
Germany 15.6 15.6 15.7 15.0 14.0
France 8.1 7.6 7.3 8.5 7.4
Turkey 4.0 4.1 6.7 7.0 7.9
Imports cif from:
Italy 19.9 20.7 19.5 17.2 15.5
Germany 15.2 14.8 14.8 14.9 14.0
Russia 7.6 7.2 8.3 6.8 8.3
France 6.3 6.4 7.3 7.1 6.7
Source: National Institute of Statistics.

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Reference tables: Main composition of trade

Main composition of trade
(US$ m; fob-cif)
  2000 2001 2002 2003 2004
Exports fob
Textiles & products 2,506 2,979 3,509 4,470 7,372
Basic metals & products 1,658 1,516 1,789 2,278 3,946
Machinery & equipment 1,451 1,680 2,171 2,827 4,487
Minerals, fuels 822 784 1,177 1,229 1,838
Total exports incl others 10,367 11,385 13,876 17,618 25,562
Imports cif
Machinery & equipment 3,216 3,527 4,092 5,752 8,437
Minerals, fuels 1,893 2,237 2,928 3,568 4,478
Textiles & products 2,131 2,500 2,278 2,969 4,761
Chemical products 1,077 1,218 1,502 1,906 2,814
Total imports incl others 13,055 15,552 17,862 24,003 35,481
Source: National Institute of Statistics.

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Reference tables: Balance of payments, IMF series

Balance of payments, IMF series
(US$ m)
  2000 2001 2002 2003 2004
Goods: exports fob 10,366 11,385 13,876 17,618 23,485
Goods: imports fob -12,050 -14,354 -16,487 -22,155 -30,150
Trade balance -1,684 -2,969 -2,611 -4,537 -6,665
Services: credit 1,747 2,032 2,347 3,028 3,614
Services: debit -1,993 -2,153 -2,338 -2,958 -3,879
Income: credit 325.0 455.0 413.0 372.0 405.0
Income: debit -610.0 -737.0 -872.0 -1,720.0 -2,171.0
Current transfers: credit 1,079.0 1,417.0 1,808.0 2,631.0 3,598.0
Current transfers: debit -219.0 -274.0 -272.0 -272.0 -491.0
Current-account balance -1,355.0 -2,229.0 -1,536.0 -3,456.0 -5,589.0
Direct investment in Romania 1,037.0 1,157.0 1,144.0 2,239.0 5,440.0
Direct investment abroad 11.0 17.0 -16.0 -39.0 -70.0
Inward portfolio investment (incl bonds) 73.0 583.0 382.0 569.0 28.0
Outward portfolio investment 28.0 -8.0 0.0 9.0 27.0
Other investment assets -407.0 -44.0 692.0 72.0 -682.0
Other investment liabilities 1,360.0 1,233.0 1,877.0 1,945.0 5,068.0
Financial balance 2,102.0 2,938.0 4,079.0 4,795.0 9,811.0
Capital account nie credit 37.0 108.0 100.0 223.0 669.0
Capital account nie debit -1.0 -13.0 -7.0 -10.0 -26.0
Capital account nie balance 36.0 95.0 93.0 213.0 643.0
Net errors & omissions 125.0 730.0 -856.0 -288.0 1,147.0
Overall balance 908.0 1,534.0 1,791.0 1,014.0 6,012.0
Financing (– indicates inflow)
Movement of reserves -897.4 -1,471.7 -2,443.5 -2,144.8 -6,646.0
Use of IMF credit & loans 114.4 66.2 107.1 231.6 0.0
Source: IMF, International Financial Statistics.

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Reference tables: External debt, World Bank series

External debt, World Bank series
(US$ m unless otherwise indicated; debt stocks as at year-end)
  1999 2000 2001 2002 2003
Public medium- & long-term 6,080 6,870 7,240 9,140 11,700
Private medium- & long-term 2,530 3,320 4,180 5,670 7,590
Total medium- & long-term debt 8,610 10,190 11,420 14,810 19,290
 Official creditors 3,990 4,480 4,520 5,060 5,650
  Bilateral 1,260 1,230 1,060 938 826
  Multilateral 2,730 3,260 3,460 4,120 4,830
 Private creditors 4,624 5,714 6,886 9,741 13,670
Short-term debt 385 388 423 492 1,370
 Interest arrears 20 12 12 14 15
Use of IMF credit 458 453 387 428 595
Total external debt 9,453 11,031 12,230 15,730 21,255
Principal repayments 3,159 1,776 1,957 2,598 2,792
Interest payments 561 672 656 580 852
 Short-term debt 23 28 18 12 20
Total debt service 3,721 2,448 2,613 3,178 3,643
Ratios (%)
Total external debt/GDP 26.6 29.8 30.4 34.3 37.1
Debt-service ratio, paida 36.8 19.5 18.7 18.9 17.2
Note. Long-term debt is defined as having original maturity of more than one year.
a Debt service as a percentage of earnings from exports of goods and services.
Source: World Bank, Global Development Finance.

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Reference tables: Foreign reserves

Foreign reserves
(US$; end-period)
  2001 2002 2003 2004 2005
Total reserves incl gold 4,861.7 7,305.2 9,450.0 16,096.0 22,413.6
Total international reserves excl gold 3,923.0 6,125.0 8,040.0 14,616.0 20,689.6
Gold, national valuation 938.7 1,180.2 1,410.0 1,480.0 1,724.0
Source: IMF, International Financial Statistics National Bank of Romania, Monthly Bulletin.

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Reference tables: Exchange rates

Exchange rates
(Lei per unit of currency unless otherwise indicated; annual averages)
  2001 2002 2003 2004 2005
US$ 2.91 3.31 3.32 3.26 2.91
£ 4.40 4.76 4.98 5.33 5.32
2.69 2.96 3.14 3.70 3.62
Rb 0.10 0.11 0.11 0.11 0.10
Rmb 0.35 0.40 0.40 0.39 0.35
¥ 0.03 0.03 0.03 0.03 0.03
Source: IMF, International Financial Statistics.

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