This Survey is published under the responsibility of the Secretary-General of the OECD. The draft report was discussed at a meeting of the Economic and Development Review Committee on 25 October 2021, with the participation of representatives of the Romanian authorities and representatives of the Czech Republic and the United-Kingdom as lead speakers. The draft report was then revised in the light of the discussions.

The COVID-19 pandemic put a halt to fast improvements in living standards. While the recovery has been strong, virus resurgence clouds growth prospects, as the vaccination rate is low.

Romania’s economic performance in recent years has been impressive. GDP per capita has reached 63% of the OECD average in 2019, from around 30% in the early 2000s (, Panel A & B). After being hit hard by the global financial crisis and before the outset of the coronavirus pandemic, Romania’s convergence in living standards progressed rapidly, with GDP and productivity growth rates persistently exceeding the OECD average supported by strong capital accumulation and efficiency gains (, Panel C). Labour market conditions improved, with the unemployment rate reaching a historically low level in 2019 and wages converging to EU average standards. Inflation, which was very high in the early 2000’s, has slowed down since 2000 (, Panel D).

While Romania’s speed of convergence to the average income levels of the OECD has been impressive since the early 2000s, significant gaps to higher income countries remain. This mostly reflects the poor performance of domestically-oriented firms, with a large and increasing productivity gap between exporting firms and domestically-oriented ones. To reinvigorate productivity growth in the domestic business sector, structural reforms are needed to address three main policy challenges. Firstly, regulatory barriers to firm entry, especially in professional services, are high and governance of SOEs is poor. Removing impediments to competition and promoting better governance are vital to boost productivity growth. Secondly, reforms to reduce inefficiencies of the insolvency regime and the judicial system are urgently needed to facilitate the exit of non-viable firms and restore a dynamic business environment. These challenges have become even more imminent following the COVID-19 crisis, which most likely requires some reallocation of activities. Thirdly, poor quality of transport infrastructure exacerbates regional disparities and undermines economic prosperity. Increasing public investment through improved absorption of EU Funds is essential to close infrastructure gaps.

A large share of Romania’s population is detached from the formal labour market and does not have the skills needed to adapt to the fast changing environment. This results in large income and regional inequalities, with some groups – low educated, women, youth, and Roma – remaining at risk of poverty and social exclusion, especially in rural areas. The COVID-19 crisis has aggravated barriers to the labour market integration of vulnerable individuals. At the same time, skill mismatch on the labour market undermines Romania’s capacity to grow and to adapt to technological progress. Improving matching to support the recovery and making it more inclusive requires a vast range of measures. First, barriers to participation should be addressed, especially for disadvantaged groups, through more effective active labour market policies. Second, youth unemployment should be tackled by addressing the high level of early school leaving and strengthening employers’ involvement in training. Finally, offering reskilling options to Romanian workers is urgently needed and requires developing adult education. Doing so will involve increasing financial incentives for workers to train and improving guidance services, especially for the low skilled and in small firms.