In 2017, Romania was the first economy in EU in terms of economic performance, up by 6.9% real GDP growth. One of the growth triggers was the increase in private consumption due to an expansionary fiscal policy. For 2018, forecasts maintain a positive outlook, with economic growth perspective to remain robust, as the European Commission forecasts a 4.5% rise.
The unemployment rate was 4.9% nationally but yet there are regions where the level of unemployment can reach up to 10%.
In 2017, inflation was 1.1% and is set to rise further in 2018, as the National Bank target is 2.5%. The general price level started to grow in 2018 and the National Bank started to practice a restrictive monetary policy.
According to the World Bank, in 2017 the budget deficit was 2.9% of the GDP and it is expected to increase up to 3.4% of the GDP due to higher gross public wages and a steep decrease of personal income tax rate from 16% to 10%.
After the global economic crisis, Romania recovered at a fast pace becoming one of the most stable financially stable and resilience countries from EU. Since 2013, the economic growth has been robust, driven by strong exports and industrial output. Romania was the best-performing country in EU in terms of real GDP growth with an increase of 6.9% in 2017 triggered by surging consumption and recovering investment.
At current prices, the nominal GDP is EUR 188 billion according to Eurostat.
Production-wise the growth was fueled by the recovery of two important sectors (construction and industry). The industrial production in the first semester of 2018 rose by 5.7% compared to the first semester of 2017 due mainly to the increase of manufacturing by 6.9%. At the same time, as concerns the demand, there was a strong surge in private consumption and investments due to the expansionary fiscal policy. Export growth, in contrast, remained highly robust in the first quarter of 2018 and outpaced the growth of imports.
Demand side components evolution Source: Ameco, Eurostat
Source: INS April 2018
In 2017 and 2016, FDI net flow stood at EUR 4.6 billion respectively EUR 4.51 billion according to the National Bank.
The FDI net flow in 2016 went primarily to trade (EUR 600 million) and to financial intermediation & insurance (EUR 800 million). Significant FDI flows (EUR 2021 million) were also channeled to manufacturing, its main sub-sectors that benefited from foreign direct investment being transport means (EUR 928 million), oil processing, chemicals, rubber and plastic products and machinery and equipment (EUR 352 million each) and manufacture of computer, electronic, optical and electrical products (EUR 164 million).
Source: National Bank of Romania
Annual Report “Foreign Direct Investment in Romania in 2016”
& *Monthly Bulletin December 2017
At the end of 2017, FDI stock amounted EUR 73.5 billion rising by 4.85% compared to 2016. In 2016, as far as the structure is concerned, equity of FDI enterprises (including reinvestment of earnings) totaled EUR 48,964 million (69.8% of the closing FDI stock) at the end of 2016. Also, net credit taken by direct investment enterprises from foreign direct investors and other companies in the group to which the investor belongs to, reached EUR 21,149 million, i.e. 30.2% of the closing FDI stock.
FDI stock was channeled primarily to manufacturing (32% of total FDI stock), where the largest recipients were: transport means (6.7%), oil processing, chemicals, rubber and plastic products (6.4% of total FDI stock), metallurgy (4.1%), food, beverages and tobacco (3.4%), machinery and equipment and wood products, including furniture (each holding 2.6% of FDI stock). Another industrial sector, i.e. electricity, gas and water supply attracted 9.6 percent of FDI stock. Apart from industry, other activities that also benefited from significant FDI were construction and real estate transactions (14%), trade (12.8%), financial intermediation and insurance (12.6% of FDI stock), and professional, scientific, technical and administrative activities and support services (5.6% of FDI stock) according to the 2016 Annual Report on FDI from National Bank.
Source: National Bank of Romania, Annual Report “Foreign Direct Investment in Romania in 2016” & **Interactive database July 2018