Romania - Economic Overview

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.

The country emerged in 2000 from a punishing three-year recession thanks to strong demand in EU export markets. Despite the global slowdown in 2001-02, strong domestic activity in construction, agriculture, and consumption have kept GDP growth above 4%.

An IMF standby agreement, signed in 2001, has been accompanied by slow but palpable gains in privatization, deficit reduction, and the curbing of inflation.

The IMF Board approved Romania's completion of the standby agreement in October 2003, the first time Romania has successfully concluded an IMF agreement since the 1989 revolution.
In July 2004, the executive board of the IMF approved a 24-month standby agreement for $367 million.

IMF concerns about Romania's tax policy and budget deficit led to a breakdown of this agreement in 2005. In the past, the IMF has criticized the government's fiscal, wage, and monetary policies.

Meanwhile, macroeconomic gains have only recently started to spur creation of a middle class and address Romania's widespread poverty, while corruption and red tape continue to handicap the business environment.

Romanian government confidence in continuing disinflation was underscored by its currency revaluation in 2005, making 10,000 "old" lei equal 1 "new" leu.

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