Discusses key economic indicators and trade statistics, which countries are dominant in the market, and other issues that affect trade.
Romania is a market with vast potential, a strategic location, though with a challenging business climate. This report is intended to aid American companies in developing and executing new and increased sales to this important and promising – yet still transitional – EU market.
The economy of Romania is a high-income mixed economy with a very high Human Development Index and a skilled labor force, ranked 12th in the European Union by total nominal GDP and 7th largest when adjusted by purchasing power parity. Romania is a leading destination in Central and Eastern Europe for foreign direct investment. Romania is the largest electronics producer in Central and Eastern Europe. In the past 20 years, Romania has also grown into a major center for mobile technology, information security, and related hardware research. 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. The top 10 exports of Romania are vehicles, machinery, chemical goods, electronic products, electrical equipment, pharmaceuticals, transport equipment, basic metals, food products, and rubber and plastics.
Romania’s economy grew dramatically in Q1 / 2021, exceeding all expectations, with an increase of 2.8% compared to Q4 / 2020, which was also a very good quarter.
In Q1 / 2021, Europe was in recession due to harsh lockdown measures. Romania coped with the third wave of COVID-19 without closing the economy, which made industry grow and consumption move forward.
The rating agency Standard & Poor’s, which has improved Romania’s rating outlook from “negative” to “stable”, considers that Romania’s economy will start to recover in 2021 at a rate of 5%, similar to the government’s forecast.
The European economy is expected to recover faster than previously estimated, with Romania’s economy expected to grow by 7.4% in 2021 and 4.9% in 2022.
This year’s and next year’s inflation forecasts have also been revised upwards. This year, rising energy and commodity prices, production blockages caused by capacity constraints and a shortage of components of factors of production and raw materials, as well as strong domestic demand, will exert upward pressure on consumer prices. In 2022, these pressures should gradually ease as production constraints are removed and supply and demand converge.
According to ONRC data, the total volume of trade between Romania and the United States amounted to almost two billion euros at the end of last year and almost one billion euros at the end of March 2021. June 2021, in Romania there were a number of active 8075 American companies present, with a total value of the subscribed share capital of 1.22 billion euros.
Romania’s economy performed strongly in the first quarter of this year. Real GDP increased by 2.8% quarter on-quarter, supported mainly by private consumption and investment. Net exports, by contrast, were significantly negative, reflecting weak external demand and supply chain disruptions. On an annual basis, real GDP is forecast to grow by 7.4% in 2021 and by 4.9% in 2022. This is higher than was projected in the spring, thanks to the stronger-than-expected performance of the economy in the first quarter of this year. Business and consumer sentiment has remained strong so far. Private consumption is expected to remain very robust, supported by the lifting of restrictions, particularly for sectors severely affected by the pandemic such as arts, entertainment, restaurants and hotels; as well as by the relatively strong growth of wages in the first months of the year. Investment is set to remain strong over the forecast horizon, supported by both the private and public sectors. The continued increase in booked orders suggests that industrial activity will expand in the coming months. Exports are set to improve in line with the ongoing recovery of Romania’s main trading partners but the contribution of net exports to growth is expected to remain negative over the forecast horizon. Growth is projected to continue into 2022, albeit at a somewhat slower pace. The sharp increase in energy prices (the combined effect of the liberalization of the domestic retail electricity market and the increase in international oil prices) as well as the recovery in aggregate demand, are set to increase inflationary pressures in 2021. Annual HICP inflation increased from 1.8% in December 2020 to around 2.7% in April 2021 and is forecast to average 3.2% over the entire year, before somewhat declining to 2.9% in 2022, as the impact of energy price increases starts to fade and the recovery in demand cools down.