Economic and Political Environment
Romania, which joined the European Union on 1 January 2007, began the transition from Communism in 1989 with a largely obsolete industrial base and a pattern of output unsuited to the country's needs.
The country emerged in 2000 from a punishing three-year recession thanks to strong demand in EU export markets. Domestic consumption and investment have fueled 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.
Romania's GDP 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, prompting Bucharest to seek a $26 billion emergency assistance package from the IMF, the EU, and other international lenders. Drastic austerity measures, as part of Romania's IMF-led agreement led to a further 1.9% GDP contraction in 2010. The economy is expected to return to positive growth in 2011.
Key economic indicators:
- Population: 21,904,551 (July 2011 est.)
- GDP (purchasing power parity): $253.3 billion (2010 est.)
- Per capita GDP: $11,500 (2010 est.)
- Real GDP growth: -1.9% (2010 est.)
- Unemployment: 8.2% (2010 est.)
- Public debt: 34.8% of GDP (2010 est.)
The Banking Environment
Romania has an independent central bank, the National Bank of Romania (Banca Nationala a Romaniei).
There are 42 banks and 11 foreign branches that operate in Romania. The 26 banks with majority foreign capital represent around 79.8% of the net assets of the total banking system, while the foreign branched represents an additional 6.9%.
Romania’s currency is the New Romanian Leu (RON), which replaced the old Romanian Leu (ROL) as Romania’s currency on 1 July 2005. The rate of exchange is RON1 = ROL10,000.
Romania has been operating a floating exchange rate system with possible NBR market intervention. In recent years, the National Bank of Romania has intervened less in the market.
See ‘Tax and Legal Template’.
There are very few restrictions (see anti-money laundering) on residents holding foreign currency accounts both within and outside Romania. Residents may only hold local currency (RON) accounts abroad in countries with which Romania has agreed convertibility arrangements.
Non-resident accounts are also permitted. These can be denominated in the local currency (RON) and some foreign currencies. Local currency accounts require central bank approval. All accounts are fully convertible, subject to the presentation of supporting documents when required.
Although many restrictions have been lifted recently, Romania retains some exchange controls. The import and export of currency require customs declarations for amounts equivalent to EUR 10,000 (for foreign currency) and EUR 1,000 (for domestic currency). Money market transactions by non-banks require authorization by the National Bank of Romania.
Central Bank Reporting
All transfers between resident and non-resident bank accounts must be reported to the National Bank of Romania.
Although banks report transactions on behalf of their customers, the resident company is ultimately responsible for the accuracy of all reporting.