Romania: One of the Fastest Growing Economies in the EU in 2016

Romania has continued to be one of the best performing economies in Europe. After gains of 3.8% in 2015, real GDP growth is expected to further accelerate, reaching 4.7% in 2016, making Romania the fastest growing nation in the European Union (EU) along with Ireland. This can be attributed to robust gains in private consumption expenditure (mainly owing to VAT cuts for all goods and services from 24.0% to 20.0%, effective since January 2016) and accelerated absorption of EU funds that is driving investment. Additionally, the government has been focusing on enhancing the country’s overall foreign investment appeal, which has also helped drive foreign direct investment (FDI) inflows. However, a shrinking workforce and an ageing populace could weigh on Romania’s overall competitiveness via reduction in productivity levels, falling tax revenues and higher pubic outlays on pension and healthcare.

Chart 1: Economic Landscape of Romania

Source: Euromonitor International from national statistics/Eurostat/OECD/UN/IMF (WEO)

Notes: (1) Wholesale & Retail Trade includes Repair of Motor Vehicles, Motorcycles and Personal and Household Goods. (2) Financial Intermediation includes Real Estate, Renting and Business Activities. (3) Public Administration includes Defence and Compulsory Social Security. (4) Education, Health & Social Work includes Other Community, Social & Personal Service Activities. (5) Data for 2016 is forecast