About Romania

Facts about YO - Romania

Economy

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. In the early 1990s the new non-Communist government began taking steps to reform the economy. These 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 of that year the Romanian parliament passed a mass privatization program with the goal of transferring more than 2000 companies to private ownership. Due to the continued slow pace of economic reforms, however, the IMF did not resume disbursing loans to Romania in 1996, and foreign investment remained negligible. In 1997 the Romanian government instituted a rigorous program of reform, which among other measures included lifting most price controls and passing legislation to allow the privatization of state banks. Although the rapid pace of the reforms initially reduced incomes and raised prices, the program held widespread public support. The IMF responded by awarding a $430 million loan, which opened the possibility of a comparable loan from the International Bank for Reconstruction and Development (World Bank).

Romania is currently a member of the IMF, 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 formally applied for full membership in June 1995. A free trade agreement with the European Free Trade Association came into effect in May 1993.

Labor

Unemployment has been a significant problem in Romania since the collapse of Communism in 1989; in 1995 about 11 percent of the population was unemployed. Approximately 36 percent of the labor force was employed in agriculture in the early 1990s; about 26 percent was employed in manufacturing, and about 3 percent was employed in mining; services employed much of the remainder.

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.

Agriculture

About 43 percent of land in Romania is used for cultivation. 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.

Forestry and Fishing

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.

Mining

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. Although important new deposits were found under the Black Sea in the 1980s, petroleum reserves are expected to be exhausted by 2010. Natural gas is produced in significant quantities. Other mineral products include lignite (brown coal), hard coal, iron ore, bauxite, copper, lead, and zinc.

Manufacturing

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.

Energy

About three-fourths of Romania’s energy is supplied by petroleum, gas, and coal, while 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. About 4 percent of Romania’s electricity is imported. The country also exports about 2 percent of the electricity it generates. A nuclear power plant was open in 1997 at Cernavodŕ; the plant is expected to contribute greatly to Romania’s energy supply and allow for greater conservation and export of electricity.

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 the mid-1990s exports totaled about $6 billion and imports totaled about $6.3 billion. Principal exports included metals and metal products, mineral products, textiles, and electrical machines and equipment. Imports included minerals, machinery and equipment, textiles, and agriculture goods. In 1993 Romania’s leading trade partners were the countries of the EU, which accounted for about 36 percent of exports and about 46 percent of imports. Other important trade partners included the countries of the former USSR, the United States, and Japan.

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 mid 199 the exchange rate was about 8750 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.

Transportation

In the early 1990s Romania had 11,127 km (about 6915 mi) of railroad track and 72,816 km (about 45,250 mi) of roads. The railroad system is owned by the government. Buses provide a popular means of transportation within cities, and Bucharest has an extended subway system.

Romania’s principal seaports are Constanta, on the Black Sea, and Galati and Brŕila, 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 Cernavodŕ, 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 and about 7 other small airlines. International airports are located in Bucharest, Constanta, Timisoara, Iasi and Arad.

Communications

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.