Romania and World Bank
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Martie 2008 |
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CĂTĂLIN PĂUNA - Economist Senior
WORLD BANK OFFICE ROMANIA |
Adresa
Strada Vasile Lascar, Nr. 31
Cladirea UTI, Etaj 6
Bucureşti, Sector 2
Telefon
+40-21-201.03.11
Fax
+40-21-201.03.38
Website
www.worldbank.org.ro
World Bank Romania
Romania is a middle income country with a GNI per capita of USD 4850 in 2006 (according to the World Bank Atlas Method). With a population of 21.6 million, it is the second largest country in Central and Eastern Europe and the seventh largest among the 27 current members of the European Union (EU).
Romania has joined the EU on January 1st, 2007, following the closing of the negotiations in 2004 and the signing of the Accession Treaty in 2005. The prospect of becoming an EU member constituted a solid external anchor for the transformation of the country throughout its transition. Nevertheless, accession to the Union and the adoption of EU standards is neither the beginning nor the end of the integration process. The reform agenda remains important and the structural adjustment needs to continue to ensure sustained real and nominal convergence with the EU.
EU membership has opened a broad range of opportunities, including access to generous EU structural and cohesion funds. It also adds to the existing challenges, coming from the commitment to implement the provisions of the acquis and cope with the rigors imposed by membership.
Romania continues to reform and restructure its economy and administration and enhance the business environment. As part of this agenda, the Government seeks to build institutions and implement public policies to fundamentally transform Romania’s economy and society. This requires determination, considerable expertise and resources, as well as popular and external support. Further structural reforms are key to preserve macroeconomic stability and consolidate a competitive market economy, capable of withstanding the pressures of EU integration. Moreover, poverty persists with 13.8%(in 2007) of the population living below the poverty line. Twothirds of Romania’s poor live in rural areas despite the country’s substantial potential in agriculture, forestry and fisheries.
Recent economic performance
Romania is steadily converging in income, competitiveness and living standards towards the EU, but the gap remains large. Since 2000, the Government has implemented macroeconomic and structural policies which are supportive of growth and disinflation. A disciplined fiscal policy, complemented by a tight monetary policy and important advances in structural reform have led to improved financial discipline in the enterprise sector and has placed public finances and the financial system on much firmer footing. In the World Bank Doing Business 2007 report, Romania was ranked as the top reformer in Europe and the second in the world, during the period 2005-2006.
Progress in reforms has translated into robust GDP growth, averaging 5-6%, for seven consecutive years. In addition, inflation and interest rates have declined steadily, the fiscal deficit was brought under control, foreign exchange reserves increased to historic highs and external debt was held to comfortable levels. The competitiveness of the enterprise sector was boosted by important productivity gains, compensating for the increase in labor costs. The gradual liberalization of trade with the EU has led to integration with the single market. Currently, over 65% of Romania’s trade is with the EU, a figure comparable with the intra-EU trade. Driven by strong FDI inflows, the share of goods of higher technological complexity in exports has steadily increased.
Romania is now a visible and attractive destination for international investors as a result of EU membership, better sovereign ratings and improved access to international capital markets. FDI inflows are estimated at around 6% of GDP in 2007.
