Before World War II Prior to
unification in 1859, the economies of
Wallachia and
Moldavia were predominantly agrarian, with
agriculture employing the vast majority of the population and serving as the primary source of exports, particularly cereals shipped via the
Danube to
Western Europe.
Oil extraction began in rudimentary form in the mid-19th century, with the first systematic refinery operational near
Ploiești by 1857, marking Romania as the site of the world's inaugural recorded
petroleum production of approximately 275 tonnes annually. Following
independence in 1878 and the establishment of the Kingdom in 1881,
foreign direct investment primarily from
Germany,
France, and
United Kingdom fueled early resource extraction, though the economy remained overwhelmingly rural, with limited
infrastructure and social relations stunted by feudal legacies. Industrial output expanded 9.6-fold between 1893 and 1913, with annual growth averaging 4.3%, propelled by oil production surging from 25,000 tons in 1887 to 1.848 million tons in 1913 and
electricity generation capacity rising from 851 kW in 1888 to 61,657 kW by 1913. The
interwar period, following territorial expansion into
Greater Romania after
World War I which tripled the land area and increased the population to about 18 million, saw initial recovery hampered by war devastation and
hyperinflation, but average annual GDP growth of 5.8% from 1920 to 1929 supported modernization efforts, including land reforms redistributing estates to over 1 million peasant households between 1918 and 1921. The
Great Depression inflicted severe contraction, with GDP per capita falling at -3.18% annually from 1930 to 1932, triggering industrial slumps and rural distress, though recovery averaged 3.4% yearly GDP growth from 1934 to 1939 via protectionist policies and
bilateral trade deals emphasizing
raw material exports. Romania's debt was completely paid off during the 1980s by implementing
severe austerity measures which deprived Romanians of basic consumer goods. Before austerity, Romania had made considerable progress in many areas. Between 1950 and 1973 Romania joined
Yugoslavia and
Bulgaria in achieving average annual growth rates that were above both the Central European and the West European average. During the first 3 post-war decades Romania industrialized faster than
Spain,
Greece, and
Portugal. The
infant mortality rate plummeted from 139 per 1,000 during the interwar period to 35 in the 1970's. During the interwar period half the population was illiterate but under the communist government illiteracy was eradicated. The population became urbanized, women's rights greatly improved, life expectancy grew, among many other achievements. In 1989, before the
Romanian Revolution, Romania had a GDP of about 800 billion lei, or $53.6 billion. Around 58% of the country's gross national income came from industry, and another 15% came from agriculture. and $14,064. Romania was the largest U.S. trading partner in Central-Eastern Europe until
Nicolae Ceaușescu's 1988 renunciation of
Most Favored Nation (non-discriminatory) trading status, which resulted in higher U.S. tariffs on Romanian products. Congress approved restoration of the MFN status effective 8 November 1993, as part of a new bilateral trade agreement. Tariffs on most Romanian products dropped to zero in February 1994 with the inclusion of Romania in the Generalized System of Preferences (GSP). Major Romanian exports to the U.S. include shoes and clothing, steel, and chemicals. Romania signed an
Association Agreement with the EU in 1992 and a free trade agreement with the
European Free Trade Association (EFTA) in 1993, codifying Romania's access to European markets and creating the basic framework for further economic integration. Romania formally joined the EU in 2007. During the later part of the Ceaușescu period, Romania had earned significant contracts from several developing countries, notably Iraq, for oil-related projects. In August 2005 Romania agreed to forgive 43% of the US$1.7 billion debt owed by an Iraq still largely occupied by the military forces of the U.S.-led "
Coalition of the Willing", making Romania the first country outside of the
Paris Club of wealthy creditor nations to forgive Iraqi debts. Growth in 2000–07 was supported by exports to the EU, primarily to Italy and Germany, and a strong recovery of foreign and domestic investment. Domestic demand is playing an ever more important role in underpinning growth as interest rates drop and the availability of credit cards and mortgages increases. Current account deficits of around 2% of GDP are beginning to decline as demand for Romanian products in the European Union increases. Accession to the EU gives further impetus and direction to structural reform. In early 2004 the government passed increases in the
value-added tax (VAT) and tightened eligibility for social benefits with the intention to bring the public finance gap down to 4% of GDP by 2006, but more difficult pension and healthcare reforms will have to wait until after the next elections. Privatisation of the state-owned bank
Banca Comercială Română took place in 2005. Intensified restructuring among large enterprises, improvements in the financial sector, and effective use of available EU funds is expected to accelerate economic growth. However, the Romanian economy was affected by the
2008 financial crisis and contracted in 2009. After communism, Romania needed
capital infusion,
entrepreneurial and managerial skills, the fastest way to obtain that was through foreign direct investment (FDI). As of 2018, total FDI in Romania was 81 billion EUR, 63% of total (51 billion) are
greenfield investments. Top ten FDI stock by country of origin in 2018 were: Netherlands (23.9%), Germany (12.7%), Austria (12.2%), Italy (9.5%), Cyprus (6.2%), France (6%), Switzerland (4.5%), Luxembourg (4.2%), Belgium (2.2%) and United Kingdom (2.1%).
Investments in Romania The level of investment remains above EU average. Investment accounts for almost 25% of GDP in Romania as opposed to 19% of GDP in the EU, in 2016. Locally, UniCredit, one of the region's leading banking firms, announced in October 2023 that it will merge its Romanian affiliate with the recently purchased Alpha bank in Romania (for €300 million), creating Romania's third-largest lender. Romania's Recovery and Resilience Plan dedicates over €6 billion to digitalisation efforts, encompassing public administration, connectivity, cybersecurity, digital skills, and the development of an integrated e-health and telemedicine system. The European Investment Bank Project Advisory Support programme aids Romania in advancing digitalisation through collaborations with the National Agency for Public Procurement and the Ministry of Research, Innovation, and Digitalisation This assistance includes evaluating ICT projects and supporting the rollout of a €600 million government cloud initiative, aimed at enhancing interoperability, reducing bureaucracy, and bolstering cybersecurity. It is now considered the next tech-startup hub country in EU. Nowadays, that Romania's digital infrastructure ranks higher than other eastern and central European countries makes it an attractive place to start a tech business. == Economy ==