Romania - Economic sectors

Romania's economy was designed for self-sufficiency under the communist regime, and great emphasis was placed on building up manufacturing industry to supply the population's needs. This resulted in a fairly diversified economy. But the 1980s scramble to repay foreign debts led to chronic underinvestment. Then, during the 1990s, the transition to a market economy and the liberalization of foreign trade exposed many of the country's products as obsolete. Two deep recessions in the past 10 years have added to the problems afflicting many of Romania's companies.

Industry's share of GDP has fallen from 41 percent in 1990 to 28 percent in 1999. Much of the slack has been taken up by services, which were underdeveloped during the communist era. Services now account for 48 percent of GDP, largely because of a growth in trade. Agricultural production also slumped heavily during the 1990s, and the inefficient structure of farming, as well as export

barriers, means it will not rise markedly in the future. Instead, Romanian growth—predicted at 3 to 4 percent in each of the next 4 years—is expected to come from reviving industry and services.

Foreign trade has developed rapidly during the 1990s, despite the disruption caused by war in former Yugoslavia, and now accounts for 64 percent of GDP. The previous Romanian government put great emphasis on encouraging exports, cutting the profit tax on exports at the start of 2000. The new government says it will continue this policy. Nevertheless, with 22 million people, the domestic market is still the main focus for most companies. It is also

the main reason why foreign investors such as France's Renault have moved to the country.

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