Embed This Data
- GDP (PPP):
- $285.1 billion
- 3.5% growth
- -0.3% 5-year compound annual growth
- $13,396 per capita
- Inflation (CPI):
- FDI Inflow:
Romania’s economic freedom score is 66.6, making its economy the 57th freest in the 2015 Index. Its score is 1.1 points better than last year, reflecting improvements in freedom from corruption, labor freedom, and the management of government spending that outweigh a decline in business freedom. Romania is ranked 27th out of 43 countries in the Europe region, and its overall score is higher than the world average.
With a steady five-year increase in economic freedom, Romania joins a growing trend in Eastern Europe. Since 2011, economic freedom in Romania has improved by nearly 2.0 points. Advances in six of the 10 economic freedoms include particularly impressive gains in reducing corruption and loosening labor regulations. In the 2015 Index, Romania has achieved its highest economic freedom score ever.
However, even with these improvements and membership in the European Union, Romania’s status as a transitional economy is still apparent. Judicial independence is precarious, and the government has struggled to meet EU anti-corruption requirements. Despite progress, the business environment remains inefficient, a remnant of the country’s Communist past.
Romania’s transition to a free-market economy began with the adoption of its new constitution in 1991. In the post–Cold War period, Romania developed closer ties with Western Europe and was accepted into NATO in 2004 and the EU in 2007. President Traian Basescu has served since 2004 and has survived multiple impeachment attempts. After years of growth, Romania experienced a deep recession as a result of the 2008 global financial crisis. Modest growth has resumed, and the government has made progress in reducing the public debt and budget deficit. Privatization of major state corporations has contributed materially to private-sector growth. In addition to its strategic position on the Black Sea, Romania has extensive natural resources, a productive agriculture sector, and the potential for strong growth in industry and tourism.
Despite some improvement, corruption remains a serious problem. According to the European Commission, there is a lack of “best practices for public procurement,” and the “competent administrative bodies do not apply effective controls to detect conflict of interest and corruption.” The courts continue to suffer from such chronic problems as corruption, political influence, staffing shortages, and inefficient resource allocation.
Romania’s top individual and corporate income tax rates are 16 percent. Other taxes include a value-added tax and environmental taxes. The overall tax burden is equal to 28.2 percent of gross domestic product, and government expenditures amount to 35.4 percent of domestic production. Public debt is equivalent to 39 percent of the domestic economy.
Launching a business takes five procedures and slightly more than a week on average, but efficient bankruptcy procedures and rules have not been fully implemented. Labor regulations remain rigid, although there have been amendments to improve the labor code’s flexibility. The government listed privatization and market liberalization as major priorities for 2014 but took no action to end distorting subsidies.
EU members have a 1.0 percent average tariff rate. Although some non-tariff barriers exist, the EU is relatively open to external trade. Despite bureaucratic challenges, Romania does not generally discriminate against foreign investment. Overall, the financial sector has coped well with the effects of the economic downturn. Banking supervision has been enhanced, but the level of nonperforming loans remains high.