Country report Romania

Economic overview

According to data published by the Romanian National Institute of Statistics (INS), the Romanian economy in 2019 recorded a 4.1% increase in GDP compared to 2018, supported in particular by private consumption. 

The average annual inflation rate in 2019 was 3.8%. The increase in the price of food products (+ 4.7%), services (+ 3.9%) and non-food products (+ 3.2%) contributed to the increase in inflation. The unemployment rate was 3.9% (average value which however reflects diversified regional situations, with the most developed areas where virtually full employment is recorded), further decreasing compared to 4.2% in 2018.

The European Commission, in the forecasts published at the beginning of May, estimates that Romania, for which a GDP increase of around 4% was expected before the crisis in 2020, will record a contraction of about 6% (less severe than the average Community equal to 7.7% of GDP) and then rebound to + 4.2% in 2021.

The COVID-19 pandemic will also have a strong impact on public finances: the European Commission expects an increase in the deficit / GDP ratio to 9.2% in 2020 and 11.4% in 2021 and the debt / GDP ratio which will rise to 46.2% and 54.7% respectively.

Main sectors of industry

Romania has a workforce of 8.9 million individuals out of its 19.5 million populace, yet this number has been diminishing in the course of the most recent decade because of the gigantic movement of Romanian laborers to Western European nations. Horticulture speaks to around 4.3% of Romania’s GDP and utilizes 22% of the nation’s dynamic populace (World Bank, 2019). 

The main resources and agricultural production in Romania are oats, sugar beets and potatoes. Nonetheless, creation stays low in correlation with the nation’s possible limit (more than 33% of the land is arable). About 25% of the nation is covered by woodland (particularly around Transylvania), and the logging business is growing extremely quick. Romania has a restricted energy reliance on account of coal, oil, gas and uranium saves. 

The industrial sector adds to 29% of the nation’s GDP and utilizes 30% of the dynamic populace. On account of modest work, its industry is differentiated and serious. Generally, fabricating organizations and the modern area speak to the foundation of Romania’s economy. Hence, foreign direct investors  are engaged with weighty industry (metallurgy, steel), the assembling of vehicle parts, building and development, oil refining and materials. As indicated by figures by the World Bank, the assembling area alone contributes 20% of GDP. 

Romania’s economy is chiefly focused on the administrations area, which speaks to 56.2% of the GDP and utilizes almost 48% of the country’s labor force. The travel industry, specifically, is blasting with 15.7 million vacationers in 2018. The innovation area has additionally observed massive development as of late, because of the rise of a high-qualified labor force whose cost is below the European normal. Romania’s ITC area arrived at 6.2% of GDP in 2017 and the ITC administrations sends out surpassed EUR 4.5 billion of every 2018.

Taxation for businesses in Romania

The tax rate for businesses is fixed at 16%, but if the company invoices less than 1 million euros per year, the rate drops to 3% and even less in special cases. Furthermore, the distribution is not taxed for resident legal persons, while it is equal to 5% for natural persons.

For individuals, however, taxes are fixed at 10%.

The flat tax of the micro enterprise is suitable for all those activities that do not have high or rather low costs, such as Consulting, E-commerce, Software – House – Holding – Real Estate Capitalization Company and, above all where personal know-how takes precedence over the production of services.

However, there is a break-even-point, calculated for each company by evaluating its convenience, a calculation performed in strategic tax planning by the Professionals.

Investing in Romania

Strategically located in the European Union between the Western Balkans and the Russian Federation, Romania is crossed by three pan-European corridors. Romania is an important gateway to the single European market (around 500 million consumers).

In the country the workforce is qualified (the knowledge of foreign languages ​​is good as well as the command of IT technologies / equipment) and labor costs, although increasing, are still relatively low. Romania boasts incredible resources: agricultural, mining, water. The energy potential is considerable also in light of the presence of gas and oil and the recent discoveries of gas and ‘shale gas’.

The stability of the political framework represents an incentive factor for investments. Also, Romania is a member of the United Nations, the Council of Europe, the OSCE and many other OOIIs, including the World Trade Organization.

The modernization of the country’s infrastructure and transport network is underway to bring it into line with EU standards. There is potential for companies in the sector. Industrial infrastructures are developed. Important privatizations are underway. There are many Italian and international banks present in the country. Presence of navigation routes.