Romania became seventh EU market in terms of size 18 months ago. It is a developing market with one of the highest regional growth potentials. A controversial 16% single profit tax rate was adopted in 2005 and represented one of key factors in stimulating economic growth and foreign investments. In the period between 2001-2007 Romania achieved an annual 6% GDP growth rate; 2008 expects it to increase.
Construction, with a 37% growth in the third quarter last year, represents the most dynamic sector. The rising trend was observed in the service sector as well due to trade and marketing services. A large share of service sector has protected Romanian economy from a more pronounced deceleration. Industrial production is also rising, although more slowly, to reach 5.1% per year in the second quarter 2007.
In the first quarter this year inflation showed an unexpected growth to almost eight percent. A significant rise of food prices was a result of the worst drought in the country in the last 60 years. This was followed by a lower Romanian rating received by Standard&Poor’s, the rating agency in mid November.
In 2007 Romania played one of key regional roles in foreign direct investments primarily due to its ability to attract €7.2 billion, which was almost half the foreign investments into Eastern Europe last year. Long-term investments continue to look for appropriate locations. Repatriation of profit after tax is allowed to foreign investors in a 100% amount, and cheaper Romanian workforce in relation to benefit made through profitability also constitutes an advantage.
Largest Romanian companies operate in energy, manufacturing and telecommunication sectors, as in 2006.
