Macro Environment in Romania

Topics: Gross domestic product, European Union, Inflation Pages: 7 (2251 words) Published: April 25, 2011
Romania began the transition from Communism in 1989 with a largely obsolete industrial base and a pattern of output unsuited to the country's needs. Domestic consumption and investment have fuelled strong GDP growth in recent years, but have led to large current account imbalances. Romania's macroeconomic gains have only recently started to spur creation of a middle class and address Romania's widespread poverty. Corruption and red tape continue to handicap its business environment. Inflation rose in 2007-08, driven in part by strong consumer demand and high wage growth, rising energy costs, a nation-wide drought affecting food prices, and a relaxation of fiscal discipline, but fell in 2009 as a result of the world recession. Romania's GDP growth contracted markedly in the last quarter of 2008 as the country began to feel the effects of a global downturn in financial markets and trade, and GDP fell more than 7% in 2009, and unemployment nearly doubled. Demography

Romania’s population peaked at 23,2m in mid-1990 and has declined steadily since then, mainly as a result of the falling birth rate and net emigration. The population has stabilized since 2000 and official estimates put the total at 21,959m in July 2010. -Female: 39.9 years 65 and over: 14.7%(m-1,332mil; f-1,934mil) Romania’s population is relatively young, with a median age of just under 40 in 2005. Median age: Age structure: Urbanization: -Total: 38.4 years 0-14 years: 15.5% (m-1,772mil; f-1,681mil) urban population: 54% (2008) -Male: 36.9 years 15-64 : 69.7% (m-7,711mil; f-7,784mil) rate of urbanization: -0.1% The trend of population decline is forecast to continue over the course of the decade, but the rate of decline is expected to decelerate as income levels rise and the health system improves. In 2007-11 the average annual rate of population decline is expected to slow to 0.1%, compared with an average annual contraction of 0.7% in 2002-06. Nowadays, the growth rate is -0.247% according to recent studies. . The economic impact of an ageing population will be softened slightly by the slowdown in the decline of the working-age population in 2007-11. However, this will be reversed after 2011, when the working-age population and the labour force are forecast to decline annually, causing an increase in the dependency rate. Some of these pressures may be eased by Romania’s relatively low level of urbanization (55% in 2005), as self-support, and lower take-up of state support, is more widespread in rural areas. 4.4% of the GDP is spent on education and the school life expectancy (from primary to tertiary level) is considered to be 15 years. Taking into consideration the literacy level, recent studies show that the ones over 15 years and over can read and write, and a total of 97,3% of the population is literate (male-98.4% and women-96.3%). Economy (+business environment)

Ernst & Young (2008) took a primarily cross-country perspective and interviewed investors from all over the globe with a focus on Western European CEOs with regard to investments in South-Eastern-Europe (SEE). Romania was found to be the most attractive country for investment (52 %), followed by Turkey (50 %). Distinguishing between already active investors and potential investors revealed a huge gap between the evaluations of several location factors for FDI in Romania. Especially production growth prospects are often underestimated by potential investors as well as human capital and infrastructure. Distinguishing location factors for the eight best ranked countries left a positive impression for Romania in virtually all categories, only challenged by Greece and Turkey. Nonetheless, the weak points were “quality of live”, “transport infrastructure and logistics” and...
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