Economy of Romania
Before World War II, the Romanian economy was primarily agricultural. In 1948 the Communist government came to power and took control of nearly all aspects of the economy. Through a series of five-year plans, the Communists transformed Romania into an industrial nation. The economy grew considerably during the first part of the Communist period, but by the 1980s it had slid into decline, and shortages of consumer goods and degradation of the environment had become widespread. After the Communist government was overthrown in 1989, the Romanian economy virtually collapsed. Although dominated by former Communists, the new government began taking steps to reform the economy in the early 1990s. These steps included devaluing the national currency, removing government subsidies on most consumer goods, and converting some state-owned companies to private ownership.
The Romanian economy declined considerably in the early 1990s. After several years of decline, the gross domestic product (GDP) increased by about 1 percent in 1993. In May 1994 the International Monetary Fund (IMF) issued the Romanian government a $700 million loan, which helped to lower the country’s inflation rate by 1995. Although Romania’s private sector grew considerably, especially in the area of services, most of the country’s industrial production remained in state hands in 1995. This provoked concern among international lenders, with the IMF suspending further loans, and hindered Romania’s efforts to attract foreign investment.
In June 1995 the Romanian parliament passed a mass privatization program with the goal of transferring more than 2,000 companies to private ownership. Due to the continued slow pace of economic reform, however, the IMF did not resume disbursing loans to Romania in 1996, and foreign investment remained negligible. In 1997 the Romanian government promised to institute rigorous reforms and the IMF responded by awarding the country a $430 million loan. However, the government only succeeded in lifting price controls before privatization bogged down again. In January 1998 the IMF froze disbursement of loans to Romania once again. Most companies remained in state hands as of early 1999.
Romania is currently a member of the IMF, the International Bank for Reconstruction and Development (World Bank), and the European Bank for Reconstruction and Development (EBRD). Romania became an associate member of the European Union (EU) in February 1993, and in December 1997 the EU invited Romania to begin the process of becoming a full member. No timetable was established at that time for when it would join. A free trade agreement with the European Free Trade Association went into effect in May 1993. 56733fyh47sdk8c
Unemployment has been a significant problem in Romania since the collapse of Communism in 1989; 6.3 percent of the population was unemployed in 1998. Some 40 percent of the labor force is employed in agriculture, forestry, or fishing; 29 percent in manufacturing, mining, or construction; and 31 percent in services.
22 percent of the working population belongs to one of a number of new trade organizations in Romania.
The regulations governing trade unions were liberalized after the collapse of the Communist government, and significant labor unrest occurred in the early 1990s, particularly among miners. Approximately 22 percent of the working population belongs to one of a number of new trade organizations in Romania. The largest such organization is the National Free Trade Union Confederation of Romania (or, CNSLR-Fratia), which was formed by a merger in 1993 and has headquarters in Bucharest. yd733f6547sddk
Farm in Romania More than two-fifths of the land in Romania is used to grow crops. During the Communist period much of the land was organized into collective farms. Since the end of Communist rule in 1989, the Romanian government has returned most of the country’s farms, such as this one located near the Carpathian Mountains, to the original owners or their heirs.Walter S. Clark/Photo Researchers, Inc.
Field crops or orchards occupy 43 percent of land in Romania. In the mid-1980s more than 80 percent of farms in Romania were either owned by the state or organized as collectives; in collective farms, workers received wages, farm products, and a portion of the farm’s profits. Because of the Communist government’s emphasis on industrial development, agricultural improvements and investments were neglected, and food shortages developed in the 1980s.
After the Communist regime was overthrown, Romania’s new government began the process of dissolving collective farms and distributing land to individual farmworkers. Although state farms were not broken up, farmworkers whose land had been incorporated into state farms were compensated. By 1994 about 46 percent of agricultural land had been returned to its original owners or their heirs, and by 1995 more than three-fourths of Romania’s farmland had been privatized.
In 1992 a severe drought caused a major decline in agricultural output; by the following year, however, the sector had largely recovered. In the early 1990s Romania’s principal crops were grains, including corn, wheat, barley, and rye; potatoes; grapes; and sugar beets. Cattle, pigs, sheep, horses, and poultry were the most important types of livestock. Wine production plays a significant role in Romanian agriculture.
C Forestry and Fishing
Forests, which cover 28 percent of Romania’s total land area, are state property. The country’s timber provides the basis for important lumber, paper, and furniture industries. The Black Sea and the Danube delta regions are known for their sturgeon catch, and the country undertakes considerable fishing operations in the Atlantic Ocean.
Petroleum is Romania’s principal mineral resource, and the city of Ploiesti is the center of the petroleum industry. However, petroleum production is declining due to the gradual depletion of reserves. Important new deposits were found under the Black Sea in the 1980s, but petroleum reserves were expected to remain slim. Natural gas is produced in significant quantities. Other mineral products include lignite (brown coal), hard coal, iron ore, bauxite, copper, lead, and zinc.
Romanian Bauxite Plant A bauxite extraction plant spews a cloud of pollution over the Danube delta city of Tulcea. Severe air pollution problems stem from the rapid industrialization of Romania during the Communist period.Barry Lewis/Corbis
During the Communist period, Romania’s leaders pursued a policy of rapid industrialization with an emphasis on heavy industry, particularly machinery and chemicals; a much lesser emphasis was placed on consumer goods (goods manufactured for use by people). In the early 1990s Romania’s chief manufactures were machinery, chemicals, cement and other construction materials, iron and steel, wood products, processed foods, textiles and clothing, and footwear. Many industries, particularly iron and steel, have been hampered by shortages of electricity and raw materials.
Thermal power plants fueled by petroleum, gas, and coal supply 59 percent of Romania’s electricity, while most of the rest comes from hydroelectric facilities. The country has two major hydroelectric plants, operated jointly with Serbia at the Iron Gate gorge on the Danube. A nuclear power plant opened in 1996 at Cernavoda.
G Tourism and Foreign Trade
Romania’s tourism industry has expanded considerably since the end of the Communist period. Popular attractions include the Carpathian Mountains, the Danube delta region, and the resorts and beaches of the Black Sea.
During the early part of the Communist period, Romania’s foreign trade was conducted almost exclusively with the USSR and other Communist countries. However, in the 1960s trade restrictions were eased somewhat and Romania began expanding its contacts with Western nations. In 1999 exports totaled $8.5 billion and imports totaled $10.4 billion. Principal exports include metals and metal products, mineral products, textiles, and electrical machines and equipment. Imports include minerals, machinery and equipment, textiles, and agriculture goods. Leading purchasers of Romania’s exports are Germany, Italy, France, Turkey, The Netherlands, and China. Chief sources for imports are Germany, Italy, Russia, France, the United States, and Egypt.
H Currency and Banking
The basic monetary unit of Romania is the leu (plural, lei), divided into 100 bani. The leu was devalued in October 1990, but since 1991 its value has been determined by the open market. In 1990 about 22 lei were equal to U.S.$1; by 1999 the exchange rate averaged 15,333 lei per U.S.$1. The National Bank of Romania (founded in 1880) is the country’s bank of issue; it is also responsible for managing monetary policy and supervising the financial activities of all state enterprises. A number of private banks have been founded since 1990. A Romanian stock market opened in Bucharest in June 1995.
Romania’s railroad system is owned by the government. Buses provide a popular means of transportation within cities, and Bucharest has a subway system.
Romania’s principal seaports are Constanta, on the Black Sea, and Galati and Braila, neighboring cities on the lower Danube; Giurgiu, which has pipeline connections to the oil fields of Ploiesti, is an important river port. A canal that opened in 1984 links Constanta with Cernavoda, a Danube River port. Another canal, completed in 1992, connects the Main and Danube rivers and allows transport from the Black Sea to the North Sea via the Rhine River. Romania has two major airlines, TAROM, which is owned by the state, and LAR, which was established as an independent airline in 1990. International airports are located in Bucharest, Constanta, Timisoara, and Arad.
Romania’s press has a regional, rather than a national, orientation.
Under the Communist regime, Romania’s press and media were subject to strict governmental control. However, the democratic constitution adopted in 1991 provides for freedom of the press. Romania’s press has a regional, rather than a national, orientation. Newspapers and periodicals are published in all of the country’s administrative districts, and many are published in the languages of Romania’s ethnic minorities, including Hungarian, German, and Serbo-Croatian. The number of newspapers in Romania has increased substantially in recent years; in 1996 there were 106. The newspaper with the largest circulation is Evenimentul Zilei (The Event of the Day), published in Bucharest. Other important newspapers include Adevarul (The Truth) and Romania Libera (Free Romania), both of which are published in Bucharest. A large number of periodicals are also published. Although radio and television in Romania are still largely state-owned, several independent stations have been established since 1990.