SEATTLE, Washington — Romania consistently ranks high in the EU for the percentage of citizens at risk of poverty. With the COVID-19 pandemic, there are concerns about what effects, economically and socially, the pandemic will have on a country that has already higher-than-average rates of social exclusion. This article will explore the circumstances and context of Romania’s economy during COVID-19 and examine what measures are being taken to combat an economic downturn.
Romania Before the Pandemic
Romania has not been without its own struggles. By the time it joined the EU in 2007, Romania was still adjusting to a post-Soviet world. High unemployment, dated infrastructure and struggling national industries plagued Romania for decades after the eastern-bloc collapse and it transitioned from Communism in 1989. In the aftermath of the 2008 global financial crisis, Romania applied for a $26 billion relief package from the IMF and World Bank. That relief allowed Romania to enjoy one of the highest annual GDP growths in the EU from 2013 to 2017.
Unfortunately, that growth was short-lived and didn’t last past 2018. That was in large part due to a decreased demand in the European automobile market which was a significant portion of Romania’s gross export. With the presence of COVID-19, Romania has entered an era of economic uncertainty much like the rest of the world.
Romania’s GDP During COVID-19
Romania’s economy during COVID-19 has regressed significantly. Romania was, and continues to be, significantly impacted by COVID-19. Since February, Romania has recorded an excess of 300,000 positive cases. Additionally, the economic impact of lockdown procedures has been extreme. Since the beginning of the pandemic, Romania has witnessed a double-fold reversal of its usual annual GDP growth. In 2019, Romania’s GDP growth was 4.2%, down from 4.5% in 2018. In 2020, GDP growth was -4.8%.
Tens of thousands of people, largely skills-based workers, have lost their jobs due to the sudden recession, furthering the widening chasm between the demand for skills-based-labor and individuals qualified to fill those roles. An already weakening national currency, the New Lei reached its new weakest point against the Euro in March. About 4.84 Lei is now equivalent to a single euro, further decreasing the buying power of citizens in Romania.
Effects on Romanian Companies
Romania’s economy during COVID-19 witnessed a significant decrease in trade and export; a dire situation for a country whose economy is largely export-driven. Ad-hoc surveys conducted by Romania’s internal National Institute of Statistics found that more than a third of all companies that responded reported a decrease in exports of up to 25%. Also, 6.5% reported decreases of 50% or more. As disruption of vital trade continues, there are concerns about the greater implications of the COVID-19 economic downturn. Romania, as of now, is only projected to have a GDP growth of 3.9% in 2021, marking the beginning of the greatest slump of Romania’s economy in 6 years.
Alina-Cristina Nuţă, an Associate professor of Finance and Business Administration at the Danubius University, expresses concerns over the future (and current state) of Romania’s economy. It is what she describes as “all too little.” Measly social security programs for the unemployed, minimal fiscal allowances to Romania’s already strained healthcare system and a “blind-eye” to the elderly in desperate need of assistance in isolation are causing even more problems for Romania’s economy.
Romania’s economy during COVID-19 has been significantly impacted, but there is hope. The World Bank, as part of a comprehensive COVID-19 emergency relief fund, pledged a 400 million euro loan to Romania to strengthen health services, stimulate private and public sectors and ensure at least some security for roughly 30% of the country’s most vulnerable peoples. This will especially help the elderly, disabled and unemployed. Time will only tell, however, the efficacy and success of Romania’s response to the pandemic.
– Henry Comes-Pritchett