The Romanian Economy

Since the political change in 1989, Romania has been undergoing a far-reaching transformation process along with other reform-minded Central and Eastern European countries. These reforms have been aimed at realigning the socio-political structures and at replacing the inefficient structures of a centrally planned economy with those of a market economy.

Starting 2000, Romania has achieved continued economic growth and succeeded to maintain macroeconomic stability. In 2004, HVB Bank Austria reported that Romania recorded a GDP growth of 8.5% just behind Latvia (8.7%) at the top of the CEE League Table. In 2005, Romania recorded a GDP growth of 4.7% and in the first eleven months of 2006, the real GDP rose 8% compared to same period of 2005, mainly conducted by increasing investments in fixed capital (1.8%) and purchasing power (9.1%), according to the latest report by the National Statistics Institute. From this perspective the major international rating agencies (Standard & Poor’s, Fitch and Moody’s) improved the investment grade and long term public rating from stable to positive. In 2007 annual GDP is expected to reach 6%, according Standard & Poor’s analysts.

The secure macroeconomic environment combined with a prudent monetary and fiscal policy has contributed to a favorable inflation performance. The latest figures show that the inflation fell to 4.7% in 2006 (compared to 8.6% at the end of 2005) and it’s the first time when the rate has been below the 5% inflation barrier in Romania.  The National Bank of Romania forecasts inflation to be 4% in 2007 and 3.8% in 2008.

As of 1 January 2006 the new Fiscal Code has been implemented. The Ministry of Finance announced that 2007 will see a more stable fiscal environment and no change are predicted by next year. More taxes have been aligned to the flat tax of 16% from the previous 25% tax on interest and on profit.
At the same time, the Romanian taxation environment has been made more attractive to employers, with slight reductions in taxes.

The Romanian currency RON has been appreciating against the US Dollar, Euro & Pound, and providing additional growth potential foreign investors. 
                              

“Romania is the first option for companies who plan to invest in South-Eastern Europe. Over 58% of companies involved in the study said they planned to invest in Romania in 2007, with 68% considering the move for the next three years” according Budapest Business Journal reports, quoting an Ernst&Young/LLP study.