Romania GDP & Unemployment rate.

With an area of 238,400 km2, Romania is the twelfth largest country in Europe. Located at the intersection of Central and Southeastern Europe, bordering the Black Sea. Romania has 3,195 kilometers of border. Republic of Moldova lies to the east, Bulgaria lies to the south, and Serbia and Hungary to the west. In the southeast, 245 kilometers of sea coastline provide an important outlet to the Mediterranean Sea and the Atlantic Ocean. And its estimated population is almost 22 milion people.

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 fueled strong GDP growth, but led to large current account imbalances. Romania's macroeconomic gains have only recently started to spur creation of a middle class and to address Romania's widespread poverty.

Corruption and red tape continue to permeate its business environment. Inflation rose in 2007-08, driven by strong consumer demand and high wage growth, rising energy costs, a nation-wide drought, and a relaxation of fiscal discipline. As a result of the global financial crisis, Romania's 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 1.6% GDP contraction in 2010. The economy returned to positive growth in 2011 due to a strong export performance, but in a deflationary environment caused by bountiful crops and weak domestic demand. In March 2011, Romania and the IMF/EU/World Bank signed a 24-month precautionary stand-by agreement, worthing $6.6 billion, to promote compliance with fiscal targets, progress on structural reforms, and financial sector stability. The Romanian authorities have announced that they do not intend to draw funds from the facility. Growth slowed to less than 1% in 2012.

GDP

Composition by structure (2011, est.):

Agriculture 7.9%

Industry 32.9%

Services 59.2%

The evolution of the Romanian economy over the past decade indicates an emerging economy that went through a phase of overheating, but now recovering, with a services sector which is still below the EU average and where low value sectors, such as agriculture, are now replaced by sectors with higher added value, which is beneficial and contribute to the real convergence criteria for the euro.

Industry increased its contribution to GDP in the last five years due to exports, after a decline in 2003-2008. Large share of the industry reflects the existence of cheap and skilled workforce that has attracted some manufacturers from developed countries. On the other way, services were rising in 2003-2008, but they have reduced their contribution to GDP during the financial crisis, although they represent the highest share of the Romanian GDP, over 50%. The share of construction in GDP has risen sharply in the years before the crisis, but this sector has been hit by the recession, contributing to economic growth decline in the last years, around 8.6%

Agriculture has continually reduced its share of GDP: from 11% in 2003 to 6.6% in 2008 and 5.3% in 2012.  Romania remains one of the EU countries with the highest share of agriculture in GDP, even though the agricultural gross value is low compared to other EU economies.

In the years preceding the crisis, economic growth was based mainly on consumption, share of services sector in GDP and the growth of construction sector, while the contribution of industry and agriculture has been declining.

In the coming years, amid slowing economic recovery and fiscal consolidation in Europe, we should see a return to the convergence mainly to support an increase in the relative importance of the service sector, a sector whose share is about 70% in European Union.

Unemployment rate

In Romania, the unemployment rate was at the level of 6.70% at the end of 2012. In all developed countries the number of unemployed young people aged between 15 and 24 years old is growing. Most of the unemployed are young people aged between 15 and 24 years. In this age group, the unemployment rate exceeds 22%. The causes of youth unemployment are often the same as unemployment causes in general. But there are specific elements that influence the share of young unemployed in the total number of people without a job, namely:

1. lack of qualification.  The fact that the training structure does not comply with the employment structure makes the educational system unable to offer the new graduates a training that will allow them to rapidly adapt to the new requirements. Youth people without skills is very hard to be employed, because in these difficult economic times companies want to invest as less as possible in the youth’s development. At this time, many young people are unemployed because of the crisis. Companies prefer, due to the lack of money, to hire people with experience, even when they need to increase their workforce;

2. the slow development of the private sector;

3. the consolidation of the quasi-monopoly of some companies which has as consequence  the non-flexibility of the work-market;

4. the deepening of the tendencies of divisioning and specialization, of forming some  groups and non-competing socio-professional categories as a result of the multiplication  of the specializations and of the differences between the employers from the point of view of practice, skills, adapting capacity.

However, we can say that that there are also a few causes of unemployment that are not determined by the above mentioned characteristics and which can be found in Romania’s economy. These causes are:

·      the natural selection;

·      psychology;

·    the changes in the economic structure and the employees’ difficulties to adapt    themselves to these changes;

·      the people’s will and behaviour;

·      the technical progress;

·  the budgetary expenses for “social protection” or “transfer payments”    (unemployment benefit, poverty benefit, etc.);

·      the laziness and the individual’s failures;

·      the political system.

Another major cause that generates and keeps the high rates of unemployment in our country is the volume of the heavy imports of products, which can be official and “unofficial”. The “unofficial” imports of products, the fact that national persons are bringing to the country products, led to the production decrease in our country after 1989 because the respective products were sold at lower prices than the similar products in Romania. This situation lasted a long period of time and made our country addicted to from the point of view of the supply with production factors. The heavy imports deteriorated the commercial balance and, therefore, the payment balance which created places of employment for the national economy and not for the foreign economies, which generated the increase of the unemployment.

Gabriel Stoica

[artigo de opinião produzido no âmbito da unidade curricular “Economia Portuguesa e Europeia” do 3º ano do curso de Economia (1º ciclo) da EEG/UMinho]