Romania’s economy began a transition from government control when Communist rule ended in 1989, but the state still has significant influence on employment, ownership of assets and the overall business climate. In fact, most sizable businesses rely on public-sector demand. However, the country’s membership in the European Union, established in 2007, has boosted leaders’ ongoing efforts to create a legal framework and business environment that fit a market economy.
The global recession hit Romania hard, and the International Monetary Fund led an economic rescue package. It came with a tough austerity program that forced the country to reduce its budget deficit. Romanian leaders complied with an increase in value-added tax and a 25% cut in public sector salaries, which led to a drop in consumer demand and spending. The economy is recovering slowly; growth was less than 1% in 2012.
Despite the sluggish economy, foreign investors see potential in Romania’s sizable and underserved domestic market and also view the country as a low-cost entry point to the broader EU market. Information technology—in particular, high-end software development and services—is a promising sector, as is telecommunications, energy, manufacturing and consumer products. Selling through a local Romanian partner is a standard entry strategy for international companies.
Business travel industry insight
Romania has not yet entered the euro zone, which is expected to happen in January 2016, at the earliest. Many transactions use local currency, the leu, but big-ticket items often are priced in euros. For example, the airline industry’s clearance system uses a daily commercial rate in euros tied to the leu to better reflects real costs. This adds a layer of complexity to transactions, as does the general opacity of travel management in Romania. The poor condition of the country’s physical infrastructure, including airports, rail and roads, affects the quality and efficiency of travel, as well as the productivity of business travelers.
- Romania’s location in Southeast Europe shortens the distance for export sales to Turkey, the Balkans, the Middle East and markets such as Ukraine and Russia.
- International Monetary Fund oversight has brought greater accountability and discipline to public spending, and the government has demonstrated commitment to meeting the IMF’s conditions.
- The country’s connections to the EU’s transportation infrastructure are underdeveloped, keeping Romania from realizing its full potential for investment, trade and tourism.
- The free-market climate continues to improve, but political influence, opaque decision-making, conflicts of interest, questionable procurement practices, and delayed payments still have a negative effect on companies operating in Romania.