Economy of Romania

The economy of Romania is a high-income mixed economy, with a high degree of complexity. It ranks 12th in the European Union by total nominal GDP and 7th largest when adjusted by purchasing power (PPP). The World Bank notes that Romania's efforts are focused on accelerating structural reforms and strengthening institutions in order to further converge with the European Union. The country's economic growth has been one of the highest in the EU since 2010, with 2022 seeing a better-than-expected 4.8% increase. In recent years, it witnessed growth rates such as: 4.8% in 2016, 7.1% in 2017, 4.4% in 2018, and 4.1% in 2019. Romania's economy ranks 35th in the world by its total GDP (PPP), with an annual output of Int$784 billion (2023 est.). Romania is the largest electronics producer in the region. The country is a regional leader in fields such as IT and motor vehicle production. Bucharest, the capital city, is one of the leading financial and industrial centers in Eastern Europe.

Top Sectors in Romania

Gas and natural resources in Romania

Romania has become a natural gas exporter. Romanian Scientist, Lazar Edeleanu, had managed, for the first time in the world, to refine oil based products with sulphur dioxide, in other words separation from the oil of some hydrocarbon groups, without their chemical alteration.

Agriculture in Romania

Agriculture employs about 26% of the population (one of the highest rates in Europe) and contributes about 4.3% of GDP. The BÄƒrÄƒgan is characterized by large wheat farms. Dairy products, pork, poultry, and apple production are concentrated in the western region. Beef production is located in central Romania, while the production of fruits, vegetables, and wine ranges from central to southern Romania. Romania is a large producer of many agricultural products and is currently expanding its forestry and fishery industries. The implementation of the reforms and the Uruguay Round of the General Agreement on Tariffs and Trade (GATT) have resulted in reforms in the agricultural sector of the economy.

Fishing in Romania

Fishing is an economic mainstay in parts of eastern Romania and along the Black Sea coast, with important fish markets in places such as Constanta, GalaÈ›i and Tulcea. Fish such as European anchovy, sprat, pontic shad, mullet, goby, whiting, garfish, Black-Sea Turbot or horse mackerel are landed at ports such as Constanta.

IT and other Industry in Romania

Romania has been successful in developing its industrial sector in recent years. The sector employed 26.4% of the workforce. Romania excels in the production of automobiles, machine tools, and chemicals. In 2013, some 410,997 automobiles were produced in Romania, up from 78,165 in 2000. As of 2018, the turnover generated by Romania's automobile industry was estimated at 28 billion Euros, with 230,000 Romanians employed in the sector. Romania has the third-highest percentage of women working in information and communications technologies (ICT) in Europe. 29% of their workforce is made up of women.

Services in Romania

The subcomponents of services are financial, renting, and business activities (20.5%); trade, hotels and restaurants, and transport (18%); and other service activities (21.7%). The service sector in Romania has expanded in recent years, employing some 47% of Romanians and accounting for slightly more than half of GDP. The largest employer is the retail sector, employing almost 12% of Romanians.

Biotechnology industry in Romania

Romania is aggressively promoting and developing its biotechnology industry. Hundreds of millions of dollars were invested in the sector to build up infrastructure, fund research and development and to recruit top international scientists to Romania. Romania features one of the world's newest competitive bio-industries, in key areas such as pharmacogenomics, protein engineering, glyco-engineering, tissue engineering, bio-informatics, genome medicine and preventive medicine. Romania is devoting substantial resources to developing universities and R&D facilities, increasing bioventure startups, growing bio-clusters (communities of biotechnology companies and institutions), and developing human resources, all with the goal of making it one of the world's most advanced biotechnology regions.

Romania - Key Economic Indicators

Exports & Imports

Romania's main exports are machinery and equipment, vehicles, and chemicals. It also exports agricultural products, textiles, and metals. Major imports include machinery and equipment, fuels and minerals, and chemicals.

Balance of Trade

Romania typically has a trade deficit, meaning the value of its imports exceeds the value of its exports. This gap is partially offset by income from tourism and foreign direct investment.

Infrastructure Development

Romania has made significant strides in infrastructure development in recent years. The total road network stretches for over 80,000 kilometers, with ongoing investments in highways and expressways. Additionally, the country is modernizing its railways, ports, and airports to improve connectivity and trade.

Fiscal Policy

Romania's fiscal policy aims to achieve sustainable economic growth while reducing the government budget deficit. The government spends on social programs, infrastructure projects, and healthcare. However, public debt remains a challenge, and the government is focusing on fiscal consolidation through spending controls and tax reform.

Monetary Policy

The National Bank of Romania (NBR) is responsible for maintaining price stability and managing the exchange rate. To combat inflation, the NBR has implemented a tight monetary policy with increased interest rates. This aims to curb inflation without hindering economic growth.

Trade Agreements

Romania is a member of the European Union (EU) and benefits from free trade with other member states. It also has free trade agreements with other countries and regional blocs, expanding its export markets.

Environmental Regulations

Romania aligns its environmental regulations with EU standards. These regulations address air and water pollution, waste management, and conservation efforts. While progress has been made, challenges remain in areas like industrial pollution and sustainable development.

Tax System in Romania

Capital Gains Tax: The rate depends on the type of asset and holding period. Generally, a 16% tax applies on profits exceeding €22,000 for assets held less than one year. Lower rates or exemptions exist for some assets like stocks or real estate held for longer durations.
Corporate Tax Rate: Romania boasts a flat corporate tax rate of 16% on profits, which is one of the lowest in the European Union.
Sales Tax (VAT): Romania uses a VAT system with two main rates: (i) Standard rate: 19% (applied to most goods and services) (ii) Reduced rate: 9% (applied to specific items like food, medicine, and books)
Property Tax: Property tax rates in Romania vary depending on the property type and location. Generally, these rates are low. Residential properties typically have rates between 0.1% and 0.25% of the cadastral value, while commercial properties may have slightly higher rates.
Payroll Tax: Romania has a social security system funded by mandatory contributions from both employers and employees. The contribution rate for employees is 10.25%, and employers contribute 25.5%. This is separate from income tax.
Tax Deductions and Credits: While Romania has a flat tax system, there are some limited deductions and credits available. Businesses may qualify for tax breaks for investments in certain sectors or research and development activities. Individual taxpayers with low income may benefit from tax deductions.
Tax Compliance: Tax compliance in Romania has been improving in recent years. The government has implemented stricter regulations and digitalization efforts to enhance tax collection efficiency. However, a grey market persists in some sectors.
Tax Burden: Compared to other European countries, the overall tax burden in Romania is considered moderate. The flat tax rate and absence of progressive income tax keep the burden lower for individuals, while the corporate tax rate is attractive for businesses.

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