Executive Summary

Romania welcomes all forms of foreign investment. The government provides national treatment for foreign investors and does not differentiate treatment due to source of capital. Romania’s strategic location, membership in the European Union (EU), relatively well-educated workforce, competitive wages, and abundant natural resources make it a desirable location for firms seeking to access European, Central Asian, and Near East markets.

Since the 1989 revolution, Romania has embarked on an uneven, but ascending economic growth path. Due to the COVID-19 pandemic, Romania’s economy declined by 3.9 percent in 2020, and rebounded with a 5.9 percent real GDP growth rate in 2021. As of February, the European Commission (EC) projected 4.2 percent real GDP growth for Romania in 2022. However, spillover effects from Russia’s invasion of Ukraine, rising global energy prices, and an ongoing COVID-19 pandemic have led several international financial institutions to adjust the growth rate downwards, predicting closer to 3 percent GDP growth in 2022.

On March 9, 2022, Romania lifted all COVID-19 pandemic restrictions. During the COVID-19 pandemic, the Government of Romania supported businesses and workers by broadening eligibilities for unemployment benefits, enabling employers to adopt flexible work models, and instituting a temporary credit and lease payment moratorium.

Romania stands to receive 27 billion EUR in grants and loans from “Next Generation EU” funding via the National Resilience and Recovery Plan (NRRP). The NRRP funding, which will be disbursed between 2021 to 2026, aims to support Romania’s green transition, digitalization efforts, and health system resilience. However, a demonstrated lack of administrative capacity to absorb and implement projects using EU funding may impact Romania’s ability to absorb the funds and dampen the NRRP’s impact.

As an EU member state, Romania’s climate objectives align with EU strategies, including the 2030 Agenda and the European Green Deal. However, legacy environmental issues limit Romania’s ability to deliver on biodiversity and clean air goals. Environmental challenges include poor air quality, inadequate waste management practices, and insufficient protective measures for natural areas. Illegal logging remains a concern despite progress towards improved traceability of extracted wood.

The investment climate in Romania remains a mixed picture, and potential investors should undertake due diligence when considering any investment. The European Commission’s 2020 European Semester Country Report for Romania pointed to persistent legislative instability, unpredictable decision-making, low institutional quality, and corruption as factors eroding investor confidence. Frequent reorganizations of public institutions also contributed to a significant degree of instability.

The government’s sale of minority stakes in state-owned enterprises (SOEs) in key sectors, such as energy generation and exploitation, has stalled since 2014. In 2020, the Romanian government enacted a two-year ban on the sale of state equities of SOEs. Successive governments have weakened enforcement of the state-owned enterprise (SOE) corporate governance code by resorting to appointments of short-term interim managers to bypass the leadership requirements outlined in the corporate governance code. Instability in the management of SOEs hinders the ability to plan and invest.

Consultations with stakeholders and impact assessments are required before enacting legislation. However, these requirements have been unevenly followed, and public entities generally do not conduct impact assessments. Frequent government changes have led to rapidly changing policies and priorities that serve to complicate the business climate. Romania has made significant strides to combat corruption, but it remains an ongoing challenge.