In the last 20 years, Romania has made considerable progress developing institutions compatible with a market economy. Joining the European Union (EU) in 2007 was a driving force for reform and modernization.
When the global financial crisis hit in 2008-09, Romania made a quick recovery thanks to prudent macroeconomic management. The crisis prompted long-needed reforms, with support from the international financial institutions, in health, education, the financial sector, public financial management, public administration, social insurance, and social assistance. Some of these reforms address short-term responses to the crisis, while others are anchored in a coherent longer-term strategy.
The implementation of a bold package of macro-stabilization and structural measures, supported by a multilateral program with the World Bank, International Monetary Fund (IMF), and the European Commission (EC), helped the country overcome the effects of the global crisis by restoring macroeconomic balances and reviving economic growth. Economic activity picked up in 2013, with growth estimated at 3.5%, and growth for 2014 is now forecasted to be 2.8%, as exports continue to grow and both consumer demand and investment recover.
Challenges to accelerate growth in the country include uncertainty in the Eurozone and exports markets, political developments in the context of local and parliamentary elections, and absorption of EU funds. In the medium term, the key challenge for Romania is to achieve steady economic growth and improve living standards while meeting fiscal targets, and to continue structural reforms and the modernization of the public administration.
Sustainable long-term growth entails that Romania adopt measures that assure compliance with fiscal targets while clearing arrears and improving quality of spending and strengthening tax collections; progress on the structural reform agenda with a focus on energy and transport sectors; and ensure continued financial-sector stability.
The National Bank of Romania (NBR) and the government took strong measures to safeguard the stability of financial markets, and banks weathered the stress well. Since the international financial support package, the exchange rate has remained broadly stable.
Romania’s energy sector is dominated by state-owned enterprises (SOEs), which the government has initiated measures to improve, as well as to enhance competition, and attract private capital needed to boost competitiveness in the sector.
Access to health care in Romania is skewed towards the wealthy. Almost half of the poor do not seek care when needed, and of the public funds allocated for health care, much is wasted on inefficient and unnecessary services or treatments. The current health system is heavily biased towards costly inpatient hospital care.
The government’s health reforms promote cost-effective outpatient and primary care services, introduce co-payments, rationalize hospital infrastructure, regulate the introduction of new drugs and technologies, and review the basic benefit package reimbursed by the public health insurance system.
Once considered a breadbasket for Europe, agriculture plays an important role in Romania however the sector is underdeveloped. Despite the highest proportion of rural population in the EU (45%), Romania has the highest incidence of rural poverty (over 70%), and one of the largest gaps in living and social standards between rural and urban areas. Romania imports an increasing proportion of its food needs, even though almost 30% of employment is in agriculture.
Romania has not yet taken advantage of EU Structural Funds for Environmental Protection and Climate Change worth €4.5 million. However, they are committed to achieving the EU’s 20-20-20 climate and renewable energy targets, which are designed to reduce carbon dioxide emissions by 20%, increase the renewable energy share of the energy mix to 20%, and improve energy efficiency by 20%, all by 2020. To do so they need to prepare a comprehensive program for funding climate change and green growth under the next programming period for EU financing (2014-20), among many other things.
One of Romania’s key priorities continues to be upgrading the skills of its population to meet Europe 2020 targets and bring the level of achievement of Romanian children in key subjects to current levels found in most European countries. A National Education Law in force since early 2011 promotes changes in virtually all areas of education.
Romania’s poverty rate declined dramatically between 2000-2008, from 36% in 2000 to 5.7% in 2008. In 2009, poverty declined further to 4.4%, due to increased social protection and insurance spending. However, despite large strides, the poverty rate in Romania is still among the highest in the EU.