The economy of Romania: structure, history and development

2024 Author: Henry Conors | [email protected]. Last modified: 2024-02-12 02:40

What does a Russian person associate Romania with? With Transylvania and vampires, with Count Dracula. With furniture that was so popular in the expanses of the Soviet Union. With gypsies, and therefore a little thieving, cunning people. Anything but a strong economy. There is also such a stereotype: Romania is an extremely poor country, with an undeveloped agrarian economy. Perhaps, 20 years ago, this thesis could be considered true, but is the Romanian economy really in such a deplorable state now? Let's try to figure it out.

Country Brief

Romania is a country with its capital in the city of Bucharest, located in Eastern Europe, in the Balkans. Its territory of 238 thousand km² is home to 19.5 million people, of which 90% are Romanians. About 87% of the population are Orthodox. The entire territory of the country is divided into 42 administrative units. Romania borders with Moldova and Ukraine in the northeast, with Hungary and Serbia - in the west, Bulgaria - in the south. The country also has access to the Black Sea.

This is a unitarya state headed by a president (Klaus Iohannis since 2014). Legislative power is exercised by a bicameral parliament. The economy of Romania is considered industrial-agrarian, although recently there has been a tendency to increase the share of the service sector. The currency is the Romanian leu (1 dollar equals approximately 4 lei). The country has a high Human Development Index of 0.81, ranking it 50th in the world.

A trip to the history of economic development

The state became independent in 1878. Since then, the Romanian economy followed a fairly successful path until the Second World War. Particularly productive for the Romanian economy was the break between the two wars. After World War I, a successful agricultural reform was carried out in the country, which by 1934 allowed Romania to become one of the main suppliers of food, especially grain, to European countries. Stable economic growth was facilitated by the sale of oil to Europe in large quantities: more than 7 million tons in 1937. By 1938, the volume of industrial production had doubled compared to 1923. Economic growth ended in Romania when World War II began. Many industrial and agricultural centers of the country were destroyed during the bombing.

Since 1950, the process of industrialization began, which by 1960 increased the volume of industrial production by 40 times. At the same time, hydroelectric power stations, various industrial and production facilities were being built. In the 1970sthe country's economic growth continues. Resort centers are being formed on the Black Sea coast, designed mainly for foreign consumers. They could buy scarce goods produced in Western Europe or the United States. The economy and standard of living in Romania are growing rapidly at this time. Oil production volumes were also actively increasing, oil refining industries were developing. At the same time, the country also faces certain kinds of problems, such as fluctuating oil prices and lack of markets for its products.

The 1980s were marked by serious problems for the Romanian economy. The depletion of oil reserves and the obligation of early repayments on loans forced the government, represented by N. Ceausescu, to move to the designation of unpopular measures and austerity. So, in Romania, food cards were introduced, a limit on the use of electricity, all manufactured goods began to be exported. Tough measures really helped to pay off foreign debts, but by the end of the 1980s the country. was on the brink of economic collapse. In 1989, the president was overthrown, and the new government began to rebuild the Romanian economy from command to market rails.

Key economic indicators

As of 2017, Romania's total GDP is $210 billion. It is 11th in the European Union. GDP per capita, in comparison with other EU countries, is quite small and amounts to only 9.5 thousand dollars (about half of the European total). Romanian GDP growth rates are impressive: in 2017 itgrew by 5.6%, which allows us to call the Romanian economy one of the fastest growing in the EU. The Romanian economy after joining the EU was able to fully stabilize. This was facilitated by the economic reforms of the early 2000s. So, in 2007, Romania was symbolically dubbed the "Balkan Tiger", drawing an analogy of a rapid leap with a jump in economic growth.

The country has a very low inflation rate (1.1%) and unemployment (as of 2018, only 4.3%). However, despite the high level of employment, about 23% of Romanians are below the poverty line. The reason for this is low wages - about 320 euros per month (throughout the EU, wages are lower only in Bulgaria). The Gini coefficient is 0.36 units, which indicates a more or less equal distribution of income among the citizens of the country. Romania's external debt is not large and amounts to 39% of GDP.

Export and import

Romania ranks 40th in the world in terms of exports and imports. In 2016, the country exported products worth almost $65 billion. The main exports were: auto parts, automotive products and tires, wheat, insulated copper wire. The largest share of exports went to Germany ($13 billion), Italy and France ($7 and $4.3 billion respectively).

Romania imported $72 billion worth of goods in 2016, meaning the country bought $7 billion more than it sold. This indicates a negative trade balance. The country buys mostly auto parts ($3 billion), medicines ($2.5 billion), cars and crude oil ($2 billion each). Romania's main trading partners are Germany, Italy and France.

Agriculture and industry in Romania

For the country in the early stages of its development, the extractive industry was extremely important. For a long time almost the only product that was exported was oil. The structure of the Romanian economy in the 20th century was for the most part precisely the mining and manufacturing industries. To this day, precious metals, ores, oil and gas are mined in the country. However, the produced gas is no longer enough even to meet their own needs, and there is quite a bit of oil left in the bowels (no more than 80 million tons). Therefore, the Romanian industry is currently represented by mechanical engineering. Dacia has been the most influential car manufacturer in the country since 1966, contributing 4.5 billion euros to the Romanian economy annually.

Agriculture in Romania is represented by plantations of corn and wheat - about 70% of all arable land is sown with them. Potatoes and beets are also grown. The following fruits are grown in the Carpathians: pears, apples, plums. There are also many grape plantations near the mountains and in Transylvania. Cattle breeding in the country is represented for the most part by breeding sheep and pigs. The agricultural sector is quite successfully coping with the requests for products among the Romanian population.

Romania's economic difficulties

One ofThe main problem facing the Romanian economy is the high level of corruption. As the investigations of the Council of Europe show, the fight against it is slow and not very effective. Corruption is also associated with public discontent. In Romania, the people massively oppose the state of affairs in the country. This could be seen in the protests that broke out in 2017-2018. due to relaxations in anti-corruption legislation.

Romania also suffers from logistical problems. The country has very poor railways and roads, which are ranked 128 out of 138 in the world ranking of roads. The situation with external debt is also alarming. Although it is quite small, its growth rate is only increasing.

General conclusion

Speaking briefly about the Romanian economy, we can say that, having gone through a long and thorny path of development and diversification, it is now quite successful. Naturally, the country still needs to grow to European salaries and living standards, but this growth is really visible. The accession to the EU has had a beneficial effect on the Romanian economy, which opened a common market for the eastern state and helps the region materially and financially. Romania's GDP is growing at a tremendous pace, faster than that of any other EU country. The volumes of exports and imports are increasing. Industry and agriculture are developing. Romania is gradually ceasing to play the role of a mere energy supplier to Western Europe.