Coining Romania as the economic gem of Eastern Europe may still be a stretch, but the country’s macro performance, shown in the graph below, is certainly stoking interest.
Even cross-country and regional assessment concurs.
According to International Monetary Fund (IMF) figures, while Europe registered annual gross domestic product (GDP) growth of 1.6% in 2016, Eastern Europe grew even slower at 1.1%. On the other hand Romania, which grew at 4.8%, outperformed the entire emerging markets and developing economies grouping, which posted a growth of 4.1% from a year ago.
Among its immediate neighbors – Bulgaria, Hungary, Moldova, Serbia, and Ukraine – only Moldova was relatively close at 4% GDP growth according to IMF data.
The strong pace of economic growth is visible in the country’s inflation as well, as shown by the graph below.
Romania was in deflation until the end of last year. But since then, prices have continued to rise fairly consistently.
Charting a course for a bright future
Until 1989, Romania was a communist state under the dictatorship of Nicolae Ceausescu. It has come a long way from a checkered political past to being a democratic nation, and a member of the European Union since 2007.
The country has a low debt-to-GDP ratio among its neighbors as shown by the graph above.
In 2012, the country discovered gas reserves in the Neptun block of the Black Sea. ExxonMobil and domestic energy company OMV are expected to begin production from the bloc in 2020. There are serious questions about whether the discovery would make Romania a major gas exporter in the region, but the reserves could make it self-sufficient.
Romania is not yet a member of the Eurozone, which means that it has not adopted the euro, and it is too early for the nation to do so. But in order to remain relevant in the EU, it has to continue improving government finances and make itself an attractive investment destination.
There are certain headwinds that will need a closer attention though. Let’s assess them in the next article.