Over the past year Romania has staged a surprise recovery, thanks to careful political stewardship and workers’ willingness to accept swingeing austerity measures. However, there is still much work to be done if the country is to fulfil its potential. Lucy Fitzgeorge-Parker reports.
ROMANIANS MIGHT BE forgiven for feeling just a touch of schadenfreude this summer. After all, according to the received wisdom of late 2008, theirs was supposed to be the big Balkan economy that came to grief – the one that failed to get a grip on public spending, that suffered from soaring unemployment and a barely controllable current-account deficit, that saw its debt repeatedly downgraded and came to the brink of default.
Instead, it is Greece that is staring into the abyss while Romania is well on the way to recovery. After shrinking by more than 7% in 2009, the country’s economy returned to growth this year and is expected by most analysts and the IMF to turn in a full-year expansion of 2%. Unemployment has stabilized at about 7.5%, the current-account deficit has fallen from 11.6% of GDP in 2008 to 4.1% last year, and the government is on track to hit its budget deficit target of 4.9% of GDP by the end of December, barely half the 8.5% recorded in 2009.
Of course, this turnaround has not been achieved without outside help. In March 2009, Romania had to go cap in hand to the IMF, World Bank and European Union for a €20 billion loan following a collapse in demand for the country’s crucial auto industry and the bursting of a property bubble in the capital, Bucharest.