With the compass pointed towards the European path, Romania today represents the second largest country in Central and Eastern Europe and the largest in Southeastern Europe, offering significant market potential in terms of size (eighth in the EU27) and population (sixth in the EU27). Romania's geostrategic importance stems from its position at the crossroads of three major markets: the European Union, the CIS (Commonwealth of Independent States) and the Middle East, as well as the fact that it is crossed by pan-European transport corridors: no. IV - which connects Europe from West to East, no. IX - from north to south, and no. VII - enabling river traffic on the Danube.
After almost a century and a half of backwardness, Romania has overcome the status of a low-income economy and progressed towards a medium level of development, the analysis of a member of the BNR Board of Directors shows: from a country deeply affected by the transition from a centralized to a market economy, Romania has become a complex economy, comparable to economies of Central European countries, such as Poland, Slovakia and Hungary.
Over the past 15 years, Romania has had the highest GDP per capita growth rate in the Southeast European region and has become one of the most attractive destinations for foreign investors. Since Romania joined the European Union in 2007, foreign investment has increased significantly and tripled economic growth. Romania has seen constant growth in foreign direct investment, from €5,2 billion in 2004 to €11 billion in 2022. Total foreign investment has more than doubled: from €42 billion (2007) to approximately €108 billion (2022). Romania's GDP grew from 100 billion euros in 2007 to around 350 billion euros in 2024. The figures clearly show how EU membership has enabled intensified economic development and an increase in the standard of living for Romanian citizens. Wages and other social benefits in Romania have almost tripled in the past 10 years, while the purchasing power of those on average incomes has almost doubled over the same period, although territorial disparities remain between the country's regions.
In terms of GDP per capita, Romania has already reached the level of Poland, with 80 percent of the EU average, overtaking countries such as Hungary or Croatia, while on the welfare index Romania has already overtaken old members, such as Spain or Portugal. The main goal of the Romanian authorities is to equal the GDP of Austria in the next five years and enter the top 10 largest economies of the EU.
A GROWING ECONOMY
ROMANIA GDP
Romania ranked seventh in the EU27 for GDP growth in 2023 compared to 2022, an improvement of four positions compared to the previous year, when it was ranked 11th (according to Eurostat data, 16 September 2024) .
• Romania's gross domestic product at market prices in 2023 was 324,6 billion euros (Eurostat, July 10, 2024).
• After a drop of -3,7% in 2020, the Romanian economy continued its positive trend from 2021, with an economic growth of 5,8 percent, compared to 2020 (according to the National Institute of Statistics, December 21 2022).
• In 2023, the estimated gross domestic product, in real terms, was higher by 2,1 percent compared to 2022 (according to data from the National Institute of Statistics, April 9, 2024).
• In the second quarter of 2024, compared to the second quarter of 2023, GDP increased by 0,8 percent, both in the unadjusted and seasonally adjusted series (according to data from the National Institute of Statistics, September 6, 2024).
• According to the Romanian economic forecast for 2024 of the National Commission for Strategy and Forecast, economic growth of 2,8 percent is expected for 2024. The medium-term forecast predicts growth of 3,5 percent in 2025, 3,7 percent in 2026, 3,3 percent in 2027 and 2,9 percent in 2028 (projection of the main macroeconomic indicators for the period 2024-2028, summer version 2024) .
When it comes to the country's development, Romania has made huge progress since joining the EU, but there are still problems in building infrastructure. There are currently 1.200 kilometers of highways, and the goal is to build about 250 km per year, which would lead to a total of 2030 km of highways and expressways by 2300. As for the modernization of small towns, especially certain municipalities, there is a need for a more balanced development of the region and a reduction in the number of citizens who are still below the poverty line. Among the key issues that need to be improved in Romania, the following can be mentioned: the capital market is not sufficiently developed, fiscal and customs policies are not sufficiently predictable, as well as the political situation in the last few months. The efforts were extraordinary and sometimes extremely complicated, but they paid off.
Today, the IT sector, the financial sector and the real estate sector are the main drivers of the Romanian economy. There are many young people who have started their own IT companies or different startups in the last decade. Currently, a large number of Romanians, especially young ones, who worked in the EU or the United States of America, are returning home to start their own businesses. They keep coming back to Romania because the living standards have become better and the conditions for doing business are easier. There are many new projects in the real estate sector that look good, and the market has developed visibly in the last 15 years.
FOREIGN DIRECT INVESTMENT IN ROMANIA
In 2020, the COVID-19 pandemic significantly affected the domestic economy, but in 2021, foreign direct investment inflows in Romania began to grow significantly along with the economic recovery. Thus, in 2021, the inflow of FDI (foreign direct investment) amounted to 8,940 million euros, which is approximately three times more than in 2020 (197,5 percent, according to the NBR Report for 2021).
• In the period January-July 2024, FDI amounted to EUR 3,121 million (compared to EUR 3,967 million in the period January-July 2023) (according to the NBR press release, September 13, 2024).
• The balance of FDI as of June 30, 2024 was EUR 116,939.94 million (NBR, August 15, 2024).
• Direct investments by non-residents in Romania during 2023 totaled EUR 6,594 million, of which equity capital (including temporary net reinvestment of profits) recorded a net value of EUR 1,065 million. (NBR – Monthly report, March 2024).
According to the Atlas of Economic Complexity by Harvard University, the Romanian economy is the 19th most complex and sophisticated in the world, estimating an average growth of 2,9% until 2030.
These numbers in themselves show how EU membership enabled intensified economic development and increased living standards for all Romanian citizens. Both NATO - as someone who provides a security umbrella - and the EU - through their coherent policies, have enabled Romania to intensify its economic development and increase the standard of living for all its citizens. A similar development can be expected in Montenegro, a reliable member of NATO and the main candidate for EU membership in the Western Balkans region. Similar to Romania, Montenegro also has a well-educated, capable and ambitious population that can function excellently within the EU. Much depends on state policies for the integration of the young generation and the provision of promising jobs and career plans in public enterprises and administration. Learning from the recent experiences of new EU members, such as Romania and Croatia, Montenegro can become the economic jewel of the Adriatic.
Romanian-Montenegro economic cooperation
The Government of Romania has expressed its political will to share its experience and best practices with the Government of Montenegro, in order to facilitate the progress of Montenegro in the reform processes within the framework of accession to the European Union. The Montenegrin authorities can learn from the Romanian experience in many aspects, not only because of the geographical proximity, but also because of the cultural, social, political and economic habits of the citizens of Romania and Montenegro.
According to the data of the National Office for the Commercial Register of Romania (ONRC), there are currently 35 joint ventures registered in that country operating in Romania, with capital from Montenegro worth 0,7 million US dollars. Montenegro ranks 101st among foreign investors in Romania (31.08.2024). Also, the number of Romanian companies operating in Montenegro is constantly growing, and in October 2024, the Balkan regional branch of the largest Romanian provider of public lighting services - URBIOLED - was registered in Podgorica.
The structure of registered companies in Romania in the period from 1990 to January 2024, according to the activities of companies with the participation of Montenegro in the equity capital, mainly includes: real estate (29,41 percent), extractive industry (26,47 percent) and professional activities (administrative , scientific and technical - 17,65 percent).
ROMANIAN ECONOMIC POTENTIAL (latest data)
• According to the ranking of the Speedtest Global Index (July 2024), Romania ranks 13th in the world out of a total of 162 countries and fourth in the EU in terms of Internet speed over a fixed connection (download speed of 203,54 Mbps and data sending speed of 136,62 Mbps ) (Speedtest Global Index ranking, July 2024).
• Romania has one of the largest domestic markets in Central and Southeastern Europe, strategically positioned at the crossroads of traditional trade and energy routes between the EU27, Asia and the CIS countries (Commonwealth of Independent States). Romania owns 1/3 of the Danube River, 200 km of coastline, as well as the largest and deepest port on the Black Sea - Constanta. Romania ranks eighth in size and sixth in population in the EU27, with almost 19 million inhabitants.
• Romania has 115 registered industrial parks - in private and public ownership, of which 25 are in greenfield locations, 14 are under construction, and 76 are functional, with a total area of 3.550,40 ha (Ministry of Regional Development and Public Administration, September 11 2024).
• In terms of mobile connectivity, Romania ranks 41st out of a total of 111 countries, with a download speed of 62,50 Mbps and a data upload speed of 14,22 Mbps (Speedtest Global Index ranking, July 2024).
• Romania provides access to one of the largest single markets in the world for those seeking development and expansion. Entrepreneurs considering investing in Romania can take advantage of all the advantages arising from the status of the European investment market.
• Romania is considered a safe country, which confirms the value of 0.000 impact of terrorism in the global index of terrorism ("no impact" category), according to the annual report "Global Index of Terrorism 2024", published by the Institute for Economics and Peace (IEP).
• Romania has joined the group of countries offering digital nomad visas for remote workers.
This text was created in cooperation with the Embassy of Romania in Montenegro, as part of the "Europe for us" project.
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This text was created in cooperation with the Embassy of Romania in Montenegro, as part of the "Europe for All" project.
