Throughout its economic history after the fall of the communist regime, Romania has been progressing positively. It was just few months ago that the growth prospects for the GDP in Romania were rather optimistic and several international and national forecast institutions predicted that GDP growth will be much above the EU-Average for 2009 and even onwards. Unfortunately, the aforementioned estimation was not reaffirmed and after the breakout of the financial and economical crisis GDP growth estimations for Romania were gradually downscaled. The economic activity was sharply declined in the last quarter of 2008 and has fallen further in early 2009. But what intervened and the diffused optimism was not finally reaffirmed?
The estimations for the Romanian economy have been based in the fallacy, as it has been proved, that the Romanian economy had obtained a certain level of institutional maturity that will enable it to protect itself from external and internal crisis. The integration of the country into the political and economical institutions of the European Union further reinforced this ascertainment and created an atmosphere of optimism and confidence.
Unfortunately, the impression of development that the Romania was giving was more a catch-up effect. The reason is that when a country starts from a low level, even small achievements appear like big steps after they have been transformed into percentages. Actually, in absolute terms the GDP of Romania was and still is on a relatively low level if it is compared with the other European countries.
Additionally, the economy of Romania has serious structural deficiencies. One of those deficiencies is the large regional disparities that the economical development of the country is facing. There are specific geographical areas of the country that are developing, as the real development is limited to some few economic centers, whereas other regions are more or less idle. This issue is quite an important one, as it leaves a lot of resources of the economy unused.
As in almost all the countries that are trying to create an economical and industrial infrastructure from the scratch, Romania, had largely based in the use of foreign direct investment (FDI) in order to assure development. The use of FDI in the case of Romania has large regional disparities as the capital that inflows in the country is limited to the few developed economic centers. That means that FDI in Romania keeps being crowded in some developed cities and is not distributed throughout the country. As a result the economy has to face sharp shortages on local labor markets a fact that is a serious drawback for the economic progress of the country.
Except from the import of FDI in the country another important factor that helped the economical development of it was domestic consumption. The economic growth that the country experienced the previous years started to stimulate the creation of a middle class and consequently tackle with Romania's widespread poverty. The amelioration of the economical situation of the Romanian people gave the opportunity to them to spend more and therefore help the further economical development of the country. During the current economic recession, the government was obliged to take austerity measures. These measures included the decrease of wages and pensions in the public sector. The aforementioned fact had as a result a drop in domestic demand and subsequently in the country's GDP.
After several years of economic growth the new financial environment that the global economic and financial crisis created highlighted the structural deficiencies of the economy of Romania which can be largely tracked to an unfinished agenda of institutional reforms. The reform agenda was stalled in 2007, when the country accessed European Union. The reason was that Romanian authorities believed that the integration of the country in the structures of the European Union is the end of the road. Thus, the truth is that accession is not the end of the integration process. It is nothing more than a milestone, an extremely important of course, but just a milestone. The reform agenda must remain alive and reforms should continue.
As many of the former Central and East European countries, Romania was in a rather positive path and could even positively surprise in some aspects of the economy. Unfortunately, the recent economic recession delineated a serious structural deficiency that the country has. The Romanian authorities understood that the chase for a stable and viable economy should be stable and consist.