State of Romanias Economy Aspects

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Romanias GDP per capita has grown over the past ten years but remains much lower than the EU average compared to that of the European Union leader, Germany. So far, Romania ranks, respectively, penultimate in the EU in terms of actual per capita individual consumption, which in 2018 was 59 percent lower than the European average (Ionescu, 2018). Romania has one of the lowest life expectancies in the EU (10 years lower than the European Union average), the highest mortality rate, and the highest morbidity rate. Bulgaria and Romania have the lowest wage rates in the European Union. Fifteen years ago, the difference between these rates in the countries in question and the EU averaged 1 to 25, but since 2017, it has decreased and is now about 1 to 5 (Ionescu, 2018). At the same time, labor productivity remains unchanged: it is still the lowest in the EU. However, maintaining low wages has a positive effect: it keeps many small and medium-sized enterprises, which are the backbone of the economies of Bulgaria and Romania, afloat.

Romanias low socioeconomic development is due to problems in its national economy, which still need to be solved before it acceded to the EU. These were exacerbated during the global financial and economic crisis and persisted to the present day. The main problem is the low competitiveness of the economy of the country in question. The second most important problem is the investment deficit, which impedes the solution of the previous one. The third problem is the Romanian economys strong financial, structural, and export dependence on the EU (Hatmanu et al., 2020). The products of most of the enterprises of the country in question are considered inferior in quality and production costs to those of the European companies. Many enterprises should have increased their exports in the conditions of the free common European market but also gave up their positions in the domestic market, unable to withstand the high competition with European producers.

Romania is a middle-income country, so its macroeconomic indicators are appropriate. GDP per capita at PPP in 2021 was $35,869 international dollars (World Bank, 2023). Only two EU countries have even lower GDP per capita. As in most EU Central and Eastern European countries, the manufacturing sector plays an important role in Romanias economy. Its share in gross value added was 19.9% in 2018, the fifth highest in the EU (World Bank, 2023). At the same time, Romanias economy, unlike the EU CEE countries, could be more export-oriented. The share of exports in GDP in 2018 was only 41.6%, an unusually low figure for a middle-income EU country (World Bank, 2023). Commodity diversification of Romanias exports is average: the bulk of exports in 2017 came from automobiles and electrical equipment, more than 15% of exports for each item (Angelidis et al., 2020). Diversification of exports by foreign trade partners is also average: Germany accounted for more than 20% of shipments, and Italy for more than 10% (Angelidis et al., 2020). Given the countrys declining level of participation in international trade, its economy is characterized by a higher dependence on domestic demand.

Several indicators depend on Romanias geographic location, exactly on the periphery of the EU, which makes it difficult for the country to participate in intra-EU trade. Household consumption accounted for 62.4 percent of GDP in 2018, the fifth-highest result in the EU (World Bank, 2023). Since 2017, the economy has grown at an average rate of 5.3%, the third-highest growth rate among EU countries (Ionescu, 2018). This is primarily due to domestic consumption on the back of strong growth in real wages. According to Romanias National Institute of Statistics, net real income has grown an average of 9.8 percent over the past five years (Bran et al., 2018). In 2019, the growth rate remained high, as the relatively low share of exports in GDP partially offset the effects of the global economic slowdown.

Reference List

Angelidis, G. et al. (2020) Competitive conditions in global value chain networks: An assessment using entropy and network analysis, Entropy, 22(10), p. 1068. Web.

Bran, F., Alpopi, C. and Burlcu, S. (2018) Territorial development disparities between the developed and the least developed areas of Romania, The 14th Economic International Conference: Strategies and Development Policies of Territories: International, Country, Region, City, Location Challenges, 2018, Stefan cel Mare University of Suceava, Romania [Preprint]. Web.

Hatmanu, M., Cautisanu, C. and Ifrim, M. (2020) The impact of interest rate, exchange rate and European business climate on economic growth in Romania: An ARDL approach with structural breaks, Sustainability, 12(7), p. 2798. Web.

Ionescu, G. (2018) A presentation of a set of macroeconomic indicators to evaluate the economic sustainability in Romania, Studies in Business and Economics, 13(3), pp. 4562. Web.

World Bank. (2023) GDP per capita, PPP (current international $) Romania (2021) Data. Web.

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