Romania shows fast economic growth after 10 years in EU

Ten years ago Romania entered the European Union as its full member state. In this time,
Romania has undergone significant changes, from legislation to the economy's structure.
Now, many are assessing the impact of EU accession on economic and social environment in
Romania, as well as the main challenges that lie ahead of business and administration in the
coming years. This is even more important after the massive protests in the beginning of
2017. These were the biggest protests the country has seen from the transition of power from
Communists do democratic regime.
Today, Romania is the second fastest growing economy in the European Union, right after
Ireland. Estimates point out that Romania might finish 2017 with 5 per cent economy
growth, a dream percentage for many other European countries. Historical burdens and
poverty are still images of nowadays Romania, even for the neighboring countries such as
Serbia. Still, the dictatorship of Nicolae Ceaușescu ended in 1989 and poverty is bygone
time. Many believe Bucharest will once again be the „small Paris“, as a metropolis of IT
companies. Romania, with its 19,7 million people, has its specificities, which have
contributed to its rising success.

The major changes

Economy, politics, and society in Romania is seen before and after the rule of the
Communist dictator Nicolae Ceaușescu. A decade before his overturn and execution,
Romania was impoverished country, capable of exporting only nuts and lunch dishes. In
many countries one could find Romanian expatriates looking for jobs. The same, however,
could be seen today. Romanian workers got the chance to escape uncertainties in their
country in 2007, when Romania and Bulgaria joined the EU. Most of them find jobs in Italy
and Spain, where they can adjust easily. Because of this emigration, a chronic deficit of
workers is present in Romania, and consequently the country has no problem with
unemployment. At the same time, while the Romanians migrated to the Western countries,
many Western companies opened their offices in Romania and eventually transferred most of
their business to Romania. Romanians themselves proved to be able to open and preserve
companies on the local market.
The Romanian parliament voted new rise of personal income in the public sector starting
from the January 2018. This is done despite the fiscal problems, but was deemed necessary
to stop the emigration of workforce, especially medical doctors and professors. The
European Commission and International Monetary Fund criticized this decision. The
Commission warned Bucharest not to raise salaries, while the IMF told the successive tax
cuts in the last two years already negatively affected the public income. Some 1,2 million
public servants will receive a raise of their income and the state will lose some EUR10bn in
next five years.
The salaries are still very low in comparison with their Western counterparts. Next year the
best ranked doctors employed in the national health service will receive EUR2,700 from
current EUR1,000. Nurses can expect rise from EUR530 to EUR900. Some professors wait
for 100 per cent rise but it will be gradual, from 2018 until 2022. “This law will change the
history of Romania,” said the leader of the leftist Socialdemocratic party Liviu Dragnea.

Agriculture

An expansion is also visible in the agriculture sector. After Ceaușescu’s death, Romania had
a serious deficit in the agriculture production. Being a country traditional tied to the
cultivation of land, it had a devastating effect on the local population. Now, Romania
successfully uses the European funds to develop large agricultural land. Romania has an
agricultural capacity of 14,7 million hectares, but some 6,8 million hectares are not used.
Close to 30 per cent of the county’s labor force is employed in agriculture, which ranks
among the highest percentages in the European Union. Lack of major investments was
always a prime problem for the Romanian agriculture business, but this began to change as
the major agricultural companies entered Romania. Now in Romania operates Meggle,
Smithfield Foods, Bunge, Cargill, Glencore, and Lactalis, making an upsurge in production
of wheat, potatoes, sunflower, tomatoes, apples.

SME and FDI

Dramatic effects of the 2008/2009 crisis were visible in lack of investment, but lately this is
changing. The capital flows are more free and investments are rising. SMEs slowly but
surely spread their business, although it is mostly within the service sector and little in
production. The Romanian Central Bank eased some preconditions for credits and it is now
easier to lend money, which also helped in the economy growth. This year the European
Commission in agreement with three commercial banks, Raiffeisen Bank, Banca Comerciala
Romana and ProCredit Bank gave EUR246m, as an initiative to boost the development of
Romanian small businesses using new and innovative ways to invest Cohesion Policy Funds.
Over 4,300 Romanian SMEs will benefit from this financing.
The membership in the European Union affected in growth of the Foreign Direct Investment
(FDI). Last year, FDI net flow in Romania stood at EUR4,51bn and continues to rise slowly.
Many foreign companies transferred their production and factories in Romania, where they
find cheaper labor force. Many European car industries came to Romania and through the
cheaper production they have successfully passed through the transition from the financial
crisis. Other areas of FDI are: metallurgy industry, banking and insurance, wholesale and
retail, energy, construction and telecommunications. The main investors in Romania are
traditionally France, Austria, the Netherlands and Germany. An interesting catch is also a
great internet infrastructure and excellent broadband speed. Today, Romania is in the same
group as Estonia, Poland, and Slovakia in the terms of developed technological and start-up
market.
In the regional aspect, Romania looks how to profit on its geographical position. After the
Polish-Croatian agreement on the transport axis Gdansk-Rijeka, Romania’s Constanta comes
into picture. Romanian government looks for the added value of this initiative in its ability to
shape concrete interconnection projects, particularly in the transport and energy sectors. As
an active and committed supporter of the Trans-Atlantic relationship, Romania is also seen
as one of the major barrier to the Russian influence in the ex-Communist countries and in the
Balkans.
It is in Romania that antiballistic shields are positioned. Through Bucharest a watchful eye is
set on the Black Sea, another frozen-conflict area of the world, where large powers seek to
administer and control the flow of transport and energy.

Source: https://financialobserver.eu/cse-and-cis/romania/romania-shows-fast-economic-growth-after-
10-years-in-eu/
 Summary

Romania has undergone some major legislation and economy changes since its enter in EU
10 years ago.Now people are considering the challenges that Romania might be facing in the
future due to the amount of protests that have happened in 2017.
Romania now is the 2nd fastest growing economy with only Ireland above her.Even if there
are still historical burdens, the dictatorship of Nicolae Ceausescu ended in 1989 and the
poverty is bygone time, meaning Bucharest might soon regain the name of “small Paris”.
Romania has evolved a lot after the abolishment of dictatorship , however, Romanians are
still looking for jobs outside their country, especially Italy, Spain and most of the the western
Europe.Due to this emigration most Romanians don’t have a problem with being
unemployed.
The Romanian parliament , despite the fiscal problems, has risen people’s incomes, in order
to stop emigration.The European Commission warned Bucharest that this decision might
affect the state.
Agriculture also expanded in Romania. Even after the deficit caused by the abolishment of
dictature, Romania managed to develop large lands with the help of EU funds. 30% of
Romanians work in agriculture with major agricultural companies entering the country such
as : Meggle, Bunge, Cargill, Glencore and Lactalis.
The crisis of 2007/2008 has affected the country causing a lack of investment, but this is
changing as nowadays investments are flowing in Romania. The Central Bank of Romania is
giving more credits, allowing people to invest more in this country. Foreign companies also
transferred their businesses in Romania, such as car businesses, metallurgy , banking, retail,
etc. Romania nowadays is part of the same group as Estonia,Poland and Slovakia in terms of
start-up market.
Also, Romania knows how to make the most of it’s geographical placement, having
Constanta, the city that lies by the Black Sea become the main source of import and export.