Population: 22.4 million Population per sq. km: 97 Population growth: -0.1% Life expectancy: 70 years Population below national poverty line: 29.6% GDP per capita(current US$): 1,695 GDP(current US$): 37,988 million GDP Growth: 5.3% Sources: National Statistical Offices, IMF, IFS, WDI 2002 and Staff estimates.
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PDF version Text Only Version Overview The starting point for the transition process in Romania was, in many respects, more difficult than in other countries in Central and Eastern Europe. Pre-transition policies emphasized self-reliance, which resulted in excessive focus on heavy industry and large infrastructure projects. During the 1980s, the rapid repayment of the US$11 billion foreign debt (20 to 30 per cent of gross domestic product (GDP)) imposed severe strains on the population, with deep cuts in imports and a widening of the technological gap. Towards the end of the 1980s the Romanian economy was on the verge of collapse. Given this difficult legacy, and seeking to protect vested interests and minimize the social costs associated with the transformation to a market economy, during the 1990s the Romanian authorities took a gradualist and piecemeal approach to reform. The imposition of hard budget constraints and privatization of state-owned enterprises were significantly delayed. This strategy failed to produce sustainable gains in either economic or social conditions. Poverty increased sharply, with the share of the population living below the national poverty line doubling in the second half of the 1990s, from 20 to 41 percent by 1999. After three years of real GDP decline, the Romanian economy began to grow in 2000, boosted by the start of EU accession discussions in Helsinki at the end of 1999. In 2000 the country recorded its first year of real GDP growth at 1.8 percent. In 2001, supported by strong export performance (over 20 percent growth in 2000 and a further 12 percent in 2001) and a gradual increase in aggregate consumption and investment, Romania began to show tangible progress on the path of reform and restructuring. Recent indicators illustrate a number of positive developments. Romania’s GDP growth of 5.3 percent in 2001 was one of the highest in Europe and, despite external shocks, the prospect for growth in 2002 is over 4 percent. Inflation, still high, has been brought down steadily from 54 percent in 1999 to 40 percent in 2000, 30 percent in 2001 and an expected 22 percent in 2002. Unemployment has been steadily decreasing, from 10 percent to 8.5 percent at present, and is much lower than in many countries in the region. Foreign reserves of the central bank have increased to over US$5 billion (including gold), equivalent to some three and a half months of imports. The external balance is stable with no prohibitive debt peaks in sight. Foreign direct investment is on an upward trend, although much lower than its potential. Export volumes in 2001 were the highest in the history of the country, and are still on the increase. The fiscal deficit during 2001 was contained to -3.3 percent of GDP and the prospect for 2003 is 3 percent. The balance of trade, which deteriorated in 2001, appears to be stabilizing. Focus of World Bank Assistance The World Bank is assisting the Romanian government reduce poverty and prepare for EU Accession by focusing its assistance in the following areas: Private sector development. Additional structural reforms are necessary to make the private sector the driver of long-term economic growth. Targeted poverty interventions. Increased access to education and primary health care for vulnerable groups will improve the quality of life and enhance human capital. Institution building and governance reform. Priorities are to strengthen public expenditure management, improve the regulatory and judicial sector, and implement an anticorruption strategy. Protection of the environment. Environmental legislation and enforcement are essential to avoid environmental hazards as privatization and land restitution programs go forward. For further details, please see the World Bank's Country Assistance Strategy for Romania for 2001-2004. Impact on the Ground Better health services now save more lives. As a result of Bank assistance, 420 rural dispensaries and 50 maternity units have been upgraded and the Mother and Child Protection Institute established. Emergency medical care has improved with the procurement of over 300 ambulances and training of medical staff. The investments have reduced the waiting time for emergency response from 20-60 minutes to 8 minutes, considerably increasing survival rates. School buildings are safer. Romania is a country with high seismic activity. Under a school rehabilitation project around 400 seriously damaged schools, and/or those in imminent danger of collapse, have been rehabilitated. As a result, over 140,000 students are protected in case of a major earthquake. By 2004, the total number of rehabilitated schools will reach 1,200. Education reform takes significant strides. Under the Reform of Higher Education and Research Project, more than 4,000 education managers have been trained. Bank financing has also supported over 900 grants to teachers and universities to improve their academic performance, thereby increasing the responsiveness of the system to the demands of new professional and managerial skills required by a market economy. Additionally, around 400 research labs were offered increased funds, and over 1,100 scholarships awarded. Under a separate Education Reform Project, in addition to a new school curriculum, 305 new textbook titles have been published, and over 20 million copies printed. New jobs for the unemployed and strengthened social protection.The National Agency for Employment, established with Bank assistance, has assisted around 80,000 unemployed persons in their search for work, and helped 27,000 people find permanent or short-term jobs. Over 2,700 of these jobs have gone to former miners and their families. In addition, over 1,000 career counseling centers have been established and are in operation. In the mining areas, within three months of starting, an Enterprise Support sub-project has contributed to the creation, assistance, or strengthening of over 120 businesses. Separately, a multi pillar pension system introduced with Bank support gives workers different options to finance retirement. Protection for the most vulnerable. Through the introduction of new care arrangements under Bank projects, the number of children living in state institutions has decreased by over 50 percent. In Bucharest, the number of street children who now live in shelters has increased by 60 percent. Better quality of life through community driven development. The quality of life of some 210,000 people improved on account of the design and operation of 339 small rural infrastructure sub-projects, under a Bank-supported Romanian Development Fund. These projects include the rehabilitation of rural roads, bridges, water supply systems and community centers; promotion of income generating activities such as wood processing, fisheries and bakeries; and improvement of social services like shelters for the homeless, home care for the elderly, family planning and tuberculosis prevention. 700 new community proposals are currently being evaluated within a Second Social Development Fund program. For details of World Bank projects in Romania please click here. Challenges Ahead