EUROPEAN

COMMISSION

Brussels, 23.5.2022
SWD(2022) 624 final

COMMISSION STAFF WORKING DOCUMENT

2022 Country Report - Romania

Accompanying the document

Recommendation for a COUNCIL RECOMMENDATION

on the 2022 National Reform Programme of Romania and delivering a Council opinion
on the 2022 Convergence Programme of Romania

{COM(2022) 624 final} - {SWD(2022) 640 final}

EN EN
ECONOMIC AND EMPLOYMENT SNAPSHOT

Russia’s invasion of Ukraine in 2022, real GDP

Romania is catching up despite is projected to just grow above 2% in 2022
some vulnerabilities and 2023 (see Graph 1.1), mainly supported
by investments from several EU funds,
including the Recovery and Resilience Facility
Romania’s economy was catching up fast (RRF). Exports and imports are set to grow at a
before the pandemic, but not in a fully lower pace due to supply-side bottlenecks and
sustainable way. In 2019, GDP per capita shortages, with the current account deficit to
was 70% of the EU average (see Annex 15), remain broadly unchanged.
up from 56.5% in 2015. Over the same period,
the real growth rate was more than double Graph 1.1: GDP growth and demand-side
that of the EU average. However, growth was components
demand-driven and boosted by expansionary 10
fiscal policy, which resulted in growing current
8
account deficits and macroeconomic pps.
forecast
imbalances. 6

Regional disparities remain high, driven 2

by labour productivity, investment and 0

employment gaps between the capital -2

and the rest of regions. In 2018, -4

productivity was below the EU average (at -6

69%) and it varied extensively between -8
regions, from 133% of the EU average in the 14 15 16 17 18 19 20 21 22 23
Net exports Investment
Bucharest-Ilfov capital region to 39% in Nord-
Priv. consumption Gov. consumption
Est, the least developed region of the country. Inventories Real GDP (y-o-y%)
The less developed regions lack key assets Source: European Commission
such as transport infrastructure, highly skilled
workers and have low levels of employment in
Prices are expected to rise, more
high-technology sectors and R&D expenditure.
markedly than before. After a mild increase
In 2021, economic activity recovered the in 2020, the inflation rate reached 4.1% in
losses of the COVID-19 crisis. Real GDP 2021 and is set to climb higher in 2022, as
grew at 5.9% due to strong private high energy prices will affect other goods and
consumption (i.e. household spending) and services, in line with global trends. Stronger
investment. Despite weak international expected wage dynamics could feed-back into
demand for Romanian goods and services and inflation. The government has adopted
supply chain disruptions, exports continued emergency measures to cut energy bills by
growing, though not as fast as imports and the capping prices and reimbursing suppliers for
current account deficit widened further. the difference with real market prices. As
Lockdown measures and rising inflation, reimbursements take long, smaller suppliers
especially rising energy prices, affected private may face liquidity constraints.
consumption in the second half of 2021.
The fiscal deficit declined somewhat, but
Economic prospects are subdued. Due to a remains a concern. Past ad hoc pension and
slowdown in late 2021 and aggravated by wage increases coupled with low public

2
revenues (1) (see Annex 18), led to large Graph 1.2: Activity, employment and
deficits already before the crisis. In 2021 the unemployment rates
deficit was 7.1% of GDP, down from 9.3% in
% of % of labour
2020. Additional spending to fight the population force
pandemic and offset increases in energy 75 10
9
prices prevented a lower deficit, which is 70
8
projected to decline somewhat by 2023 due to 7
growth recovery and increased revenue 65
6
collection, supported by the recovery and 60 5
resilience plan (RRP). However, to go below 3% 4
by 2024, in line with the June 2021 Council 55
3
recommendation, will remain a challenge 50
2
without corrective measures. The large 1

structural primary deficit set for 2023, the 45 0

2009Q1
2009Q4
2010Q3
2011Q2
2012Q1
2012Q4
2013Q3
2014Q2
2015Q1
2015Q4
2016Q3
2017Q2
2018Q1
2018Q4
2019Q3
2020Q2
2021Q1
2021Q4
increasing government debt, its sensitivity to
macro-fiscal shocks, and the uncertainty
Unemployment rate 15-74 (rhs)
around baseline debt projections point to Activity rate 20-64
substantial and moderate fiscal challenges Employment rate 20-64

over the medium and long term Source: European Commission

respectively ( ). Fiscal deficits also contributed
2

to a negative current account balance and Wage growth is set to rebound but
higher public debt, with costlier financing. poverty and in-work poverty remain a
Romania currently has the highest bond yield challenge. The pandemic caused wage
spread in the EU and its debt is just at growth to level out. Yet in 2021, nominal and
investment-grade level. real wage (5) growth rebounded to 5.7% and
0.3% respectively. In early 2021, the
The labour market performed well government raised the minimum gross salary
despite the COVID-19 pandemic, but key to RON 2 300 (EUR 466) and approved an
challenges remain. The employment rate increase to RON 2 550 (EUR 515) as from
continued to grow, from 65.2% in 2020 to January 2022. On the other hand, public
67.1% in 2021 (see Graph 1.2). SURE (3) wages were frozen in 2021, after increasing
supporting measures are also a contributing 37.5% over the past 4 years. Stronger growth
factor. Still, employment rates of the young is forecast for 2022 in overall nominal wages
and older people, Roma, women and the low- of up to 8.3%, but due to high inflation is set
skilled remain far below the EU averages, to be negative in real terms -1.1% (2022
while the disability employment gap increased Spring Forecast). In-work poverty remains high,
to 30.4pps. The gender employment gap is driven by occasional or part-time work, self-
high and has been widening (see Annex 12). employment and informality (i.e. undeclared
The unemployment rate fell to 5.6% in work). The share of people at risk of poverty
2021 (4), down from 6.1% in 2020 but is still remains high (see Annex 12).
above pre-crisis levels. The Commission’s
2022 Spring Forecast estimates that it will
decrease to 5.5% in 2022 and to 5.3% in Challenges persist in several areas
2023, on the back of a subdued growth.

Romania’s business sector has long-

(1) Government revenues in Romania are less than 30% of
GDP, compared with and EU average of 40%. Property standing structural weaknesses.
and capital are taxed at a low rate compared to labour. Insufficiently developed and outdated
(2) Fiscal Sustainability Report 2021. transport infrastructure makes it difficult to
transport merchandise within and outside the
(3) Council Implementing Decision (EU) 2020/1355:
http://data.europa.eu/eli/dec_impl/2020/1355/oj
(4) Eurostat Labour Force Survey main indicators adjusted (5) Proxied by nominal and real (GDP deflator)
series compensation per employee.

3
country, and deepen territorial disparities. The phasing out of coal-fired power
Excessive red tape coupled with an at times production requires a major increase in
inefficient public administration and renewable energy production capacity.
unpredictable legislative framework (see The Decarbonisation Law and investments to
Annex 11) are detrimental to the business increase the renewable energy production are
environment and limit investment essential. Ensuring a just transition to green
opportunities, especially for domestic energy sources should remain a priority for the
companies. There is significant scope for the affected regions and communities. Also, any
correct use of corporate governance principles obstacles to solar and wind energy
in state-owned enterprises in key sectors such investments should be removed.
as energy, transport and local public utilities,
as discretionary board appointments limit their Closing illegal and substandard landfills
efficiency and effectiveness. along with rehabilitation measures can
protect health and the environment.
Adverse demographics put pressure on Irregular and substandard landfills and fly
the labour market and the training and tipping operate in Romania and present
education system. Current trends point to an serious risks for human health and the
8.8% reduction in the workforce in 2030 environment. Landfills also lack infrastructure
compared to today (6). This will require higher capacities, as do the counties where they are
productivity levels and an increase in the located.
employment rate, notably of women, Roma,
young and older people, persons with Significant investments and reforms in
disabilities and those with a low educational digital policy could close existing gaps. In
attainment. Still, the skills of the workforce the digital public administration various public
remain insufficiently aligned with the needs of IT systems are not interoperable; e-
the labour market Skills shortages and government services are scarce and where
mismatches, and a weak education and they exist uptake is low. While overall
training system negatively affect prospects. broadband connectivity has been significantly
The capacity of the Public Employment improving (see Annex 8), parts of the country
Services to provide integrated and targeted are still not connected to fixed very high
support, including upskilling and reskilling, capacity networks broadband. Basic digital
remains limited. skills are lacking and the number of ICT
specialists is insufficient. Finally, Romanian
Social and health services remain enterprises do not take full advantage of
insufficient, including access to long-term digital technologies such as electronic
care. Lack of human resources and information sharing, social media, big data and
administrative capacity at local level are cloud.
among the factors affecting the availability of
integrated services and progress in the Romania is making progress on most of
deinstitutionalisation of adults with disabilities. the UN’s Sustainable Development Goals
The deinstitutionalisation process for children (SDGs), but challenges remain. Poverty and
continues, as established, with the objective of deprivation are decreasing and basic health
being finalized as soon as possible. Disparities outcomes improving (see Annex 1). Still, poor
in access to healthcare are lingering, with 11% quality and low expenditure in research,
of the population uninsured and an uneven development and innovation (R&D&I) affect
distribution of the workforce across the industrial capabilities. Some concerns remain
country. Home care coverage is among the on the rule of law: the effectiveness of justice
lowest in the EU (see Annex 12). system is deteriorating (especially for
administrative cases – see Annex 11) and the
perception of corruption remains high.
(6) In 2021, population aged 15-64 numbered 12.5 million, Significant progress is needed on 3 SDGs:
and it is set to decrease to 10 million by 2040
gender equality, quality of education and
(Assuming as baseline Eurostat’s demographic
projections).

4
responsible consumption and production, as under great strain during the pandemic, but
action has been limited in recent years. also in education. In the medium to long run,
integration in the labour market of individuals
deciding to stay in Romania could bring about
an increase in active population and boost
Russia’s invasion of Ukraine has potential output. Romania will benefit from the
clouded the economic outlook exceptional flexibilities provided in the
framework of the Cohesion’s Action for
Refugees in Europe (CARE) initiative and from
Russia’s invasion of Ukraine is expected additional pre-financing under the Recovery
to negatively impact Romania’s economy. Assistance for Cohesion and the Territories of
The direct negative effects of the invasion are Europe (REACT-EU) programme to urgently
likely to be limited due to Romania’s small address reception and integration needs for
overall trade linkages to Russia and Ukraine. those fleeing Ukraine as a result of the
Nonetheless, the indirect effects could Russian invasion.
sizeable.

The impact on energy and commodity

prices has wider implications. Given
Russia’s and Ukraine’s importance as suppliers
of oil, gas and commodities (food and non-
food) in global markets, prices have increased
significantly. Romania produces the majority
of its gas domestically but imports almost
20% of total gas consumption, which is
heavily dependent on a Russian pipeline via
Ukraine. At the same time, Russian crude oil
imports are the primary input for the large
refining industry, which then re-exports
finished oil products. As a consequence,
inflation is set to increase further, dampening
private consumption in spite of the exceptional
measures to cushion households and SMEs
from the impact of electricity and gas bills
that were introduced.

Specific sectors are particularly exposed.

Some important Romanian industries (such as
automotive and machineries) and the
construction sector are particularly vulnerable
to energy imports, energy price movements
and raw material needs, including rubber,
steel, iron, lumber and phosphate rock, a
primary input in fertilizer and chemical
industry.

Romania is a frontline country in this

humanitarian and geopolitical crisis.
Romania is hosting a large number of
displaced persons from Ukraine, although the
majority eventually leave to other EU
countries. Addressing their needs will require
the mobilisation of additional resources in the
healthcare and social systems, which came

5
THE RECOVERY AND RESILIENCE PLAN IS UNDERWAY

The Romanian recovery and resilience coal and lignite power production. The
plan (RRP) includes important measures plan envisages to phase out coal and lignite-
aimed at accelerating the twin green and fired power production by 2032, which is
digital transition and reinforcing crucial for the decarbonisation of the energy
economic and social resilience. It includes sector, supporting the transition to green
EUR 14.2 billion in grants and EUR 14.9 billion sources of energy production (see Annex 5).
in loans to support the implementation by The Decarbonisation Law expected by June
2026 of crucial reforms and investments (see 2022 will set out a concrete timeline for coal
Annex 2). and lignite phase out across the country
production sites and commit to concrete
targets for green energy production.
Significant investments supported by the plan
Green transition and the Just Transition Fund will help to
address the social and employment impact of
the green transition (see Annex 6).
Romania’s plan will contribute to the
green transition. Reforms include regulatory
changes to incentivise zero-emission road
transport, improve road safety and encourage Digitalisation of the public
the modal shift to railways and inland administration
waterways. Significant investments are
planned in zero-emissions and upgraded
railway rolling stock, for the modernisation The plan intends to modernise the public
and renewal of railway infrastructure and for administration by addressing
the development of the underground transport fragmentation and lack of
network in Bucharest and Cluj-Napoca. interoperability, and by removing
unnecessary bureaucratic barriers. On the
A strong boost to the energy efficiency of Digital Economy and Society Index, Romania
private and public buildings is a key ranked last in the digital public services
priority of the plan. The investments to dimension in past years (see Annex 8). The
upgrade the current stock of both private and plan puts forward an ambitious set of reforms
public buildings (including historic buildings) and investments and allocate of over EUR 3
will have a clear impact across the country. billion to that end. It focuses on introducing an
Building renovations will be carried out by interoperability law and on developing and
local authorities and aim not only at energy implementing a unitary framework for a
efficiency improvements but also at seismic government cloud system connecting up to 30
consolidation works where needed. Together public institutions. The digitalisation of the
with the setting-up of a National Digital public administration also follows a sectorial
Building Register, the creation of certification approach through measures related to e-
programmes and a pool of professionals in health, digitalisation of the justice system,
energy efficiency renovations in historic environment, employment and social
buildings will create major spill-over effects. protection and the implementation of e-forms
for public procurement. The rollout of the e-
The deployment of renewables is identification scheme for a large part of the
expected to increase in view of the population will facilitate the public’s access to
country’s commitment to phasing out a range of electronic services.

6
 training, and improving educational
Fiscal and pension reform infrastructure. Measures will also support
digital skills development for students and
teachers.
The plan includes a comprehensive set of
reforms and investments to address key The plan also tackles poverty and
tax challenges. These cover, among others, inequality in Romania, which is among the
reforms of the tax administration, the tax highest in the EU, thereby contributing to
system, the government budgetary framework, implement the European Pillar of Social
and an expenditure review to support Romania Rights. The social reforms aim to support
in exiting the excessive deficit procedure by children, persons with disabilities and older
2024. people as well as the formalisation of
domestic work. The minimum inclusion income
To ensure fiscal sustainability and
reform intends to improve the efficiency of
correct inequities, the pension system social assistance benefits by extending
reform is a central element of the plan. coverage, increasing adequacy and improving
New legislation, entering into force in Q1 the incentives to take up employment. The
2023, will adapt the current pension system to national long-term-care strategy should help
an ageing population and strengthen the address the needs of an ageing society. The
contributory principle. The reform will reduce deinstitutionalisation of persons with
possibilities for early retirement, provide disabilities should accelerate their integration
incentives for postponing retirement, revise into the community. The plan also envisages
special pensions, and increase the adequacy of establishing a new mechanism for minimum-
minimum and lower pensions. It will also wage setting, based on objective criteria, and
introduce a new calculation formula and the consultation of social partners.
indexation rule and ensure the financial
viability of Pillar II (i.e. the mandatory private
pension scheme) of the pension system. The
new legislation will help maintain total gross Health resilience
public pension expenditure (including all
existing public pension schemes) stable at
9.4% of GDP in the long term (2022-2070), The pandemic exposed the fragility of the
incorporating a brake mechanism if the healthcare system. The plan will use EUR
expenditure cap is exceeded. The reform will 2.85 billion to increase health coverage and
also contribute to the modernisation of the the quality of health services. A new Agency
pension system, by introducing digital for the Development of Health Infrastructure
applications and services. (ANDIS) should oversee the construction of
and manage some of the 25 hospitals
envisaged in the plan. Marginalised
communities will be prioritised and many of
Education and social policies the newly built or renovated family-doctor
practices, integrated community centres and
outpatient care units will be located in regions
The RRP will support education and skills
with the greatest needs. Through the plan,
development, allocating 12.4% of the Romania will advance on the overdue upgrade
overall budget to such measures. of the national health infrastructure to help
Measures include the implementation of ensure social cohesion and an increased
various reforms outlined in the Educated access to healthcare (see Annex 14).
Romania project, which envisages an in-depth
restructuring of the education and training
system by 2030. Other reforms and
investments cover early childhood education,
reduction of early school leaving, increasing
the quality of vocational education and

7
Public administration Research, development and
innovation (R&D&I)
The plan aims to increase the
independence, quality and efficiency of The plan envisages several measures to
the justice system, as well as the improve the R&D&I system. It supports the
capacity, transparency and effectiveness integration of research organisations into the
of the public administration. Better European Research Area, and their capacity to
coordination and monitoring of policy and access European funds for R&D&I, as well as
legislative initiatives at the central level will grant schemes aiming at attracting and
provide companies and individuals with a more rewarding talent. It also provides a framework
coherent and transparent regulatory to streamline R&D&I governance, reform the
framework. The plan aims to increase the research career, and enhance cooperation
independence, quality and efficiency of the between business and research. To that end, it
justice system and improve its ability to asks for support from the2021-2022 Horizon
investigate and prosecute corruption offences, Europe Policy Support Facility to implement
which is crucial to safeguard the financial the implementation of the forthcoming
interests of the EU. The public procurement recommendations by the 2021-2022 Horizon
system will be modernised. Reforms of the Europe Policy Support Facility.
corporate governance of state-owned
enterprises will increase their profitability and
level the playing field.

Box 2.1: Key deliverables under the recovery and resilience plan 2022-23
 Decarbonisation law
 Decommissioning of coal-fired power-production capacity
 Adoption of the National Road Safety Strategy
 Adoption of the 2021-2026 National Cybersecurity Strategy
 Adoption of a new social dialogue law
 Start of implementation of the national programme to reduce early school leaving
 750 educational establishments with high risk of drop-out will receive grants to support
students transitioning from lower to upper secondary education
 Establishment of the National Agency for Infrastructure Development in Health (ANDIS)

8
FURTHER PRIORITIES AHEAD

Beyond the challenges addressed by the Romania needs a competitive business

RRP, as outlined above, Romania faces environment. The main ingredients for a
additional challenges not sufficiently successful productive system are there, but
covered in the plan. More effort is needed to they need to be integrate better. This requires
enhance the innovativeness and fostering interaction between foreign-owned
competitiveness of the private sector across enterprises and inward-oriented companies,
regions, tackle increasing inequalities and forging partnerships between science and
extend activation measures, and strengthen industry, making markets for professions more
local fiscal capacity. Addressing these competitive, and facilitating access to finance.
challenges will also help to make further
progress in achieving the SDG related to Romania struggles with innovation and
quality education (SDG 4), gender equality firms’ capacity to absorb technology
(SDG 5), decent work and economic growth remains limited. Gross expenditure in R&D is
(SDG 8), sustainable development (SDG 9), the lowest in the EU (see Annex 9). At
reduced inequalities (SDG 10), and domestic company level, business expenditure in R&D is
capacity for tax collection (SDG 17) (see significantly lower than the average in the rest
Annex 1). EU funds can contribute significantly of the EU. Foreign-owned firms display higher
to addressing these challenges, but strong capacity to adapt to new technologies,
administrative capacity will be needed to compared to their domestic peers. The relative
ensure they are used effectively. number of tech start-ups and high-growth
tech enterprises (often drivers of innovation) is
lower than in other Member States.
Enhancing innovation capacity and Momentum for innovation is growing, but
competitiveness is concentrated in a few regions. The
information and communications technology
sector is booming, but mostly in the Bucuresti-
Productivity in Romania has been growing Illfov, West and the North-West regions.
significantly, but there is ample scope for Innovation hubs are emerging. For example,
catching up with the rest of the EU. Over private and public actors in the North-East
the past 20 years, labour productivity has region, together with the regional development
been increasing more than in the rest of the agency, created a successful community of
EU (7.6% per year, on average), but Romania entrepreneurs to mentor start-uppers and
is still lagging behind (see Graph 3.1 and nurture entrepreneurship. However, such
Annex 10). In particular SMEs, the backbone of initiatives remain sporadic and there is a lack
the economy, have an average productivity of strategic vision for the start-up ecosystem.
three times lower than the EU average. While Finally, outside of the large centres, research
SMEs benefiting from large foreign direct institutes are gradually losing the capacity
investments are more sophisticated and (already scarce) to generate policy- or
innovative and have been contributing to the business-relevant research.
country’s productivity growth, those without
foreign support often remain undercapitalised,
not well integrated in global value chains and
struggle to absorb technology. They need a
different ecosystem to be able to thrive.

9
Graph 3.1: Productivity growth and gap in Successful knowledge transfer and
Romania absorption requires research output
600 60% closer targeted to industry needs.

labour productivity in EU top 20% performers

Labour productivity normalised (2000=100)

Labour productivity in Romania as a share of

Research institutes cannot always provide that
500 50% output, in part because of the highly
fragmented research landscape. In 2018, a
400 40%
majority of state universities had less than
300 30% 10 000 students and one-third had less than
5 000 students (8). Universities and research
200 20%
centres could serve business communities
100 10%
more effectively if they explored synergies and
pooled resources, without breaking their ties
0 0% with local industry.

Romania relative labour productivity (RHS) Competitive firms need well-functioning

Romania (LHS)
EU27 (LHS) markets for professional services. Some
Source: European Commission of these services like lawyers, notaries and
accountants are essential to day-to-day
Science-industry partnerships, though business operations. They enable companies
still uncommon, can help narrow (especially small ones) to outsource supporting
innovation gaps. Through these partnerships, tasks and focus on their core business, thereby
companies can address critical issues increasing productivity. Open and competitive
affecting central business areas and core services markets with low barriers to entry are
technologies, improve their access to therefore essential to Romania’s
advanced machinery and skilled scientists, and competitiveness.
update their management practices and
Some markets for professional services
capabilities. However, Romania struggles to
forge such partnerships. There is little support remain highly restricted. Lawyers need two
for entrepreneurial activities for academics licences to operate (one issued by the
(funding is irregular and limited) and professional body and another by the state
companies often do not have innovation goals authority) and face stringent entry
or strategies on how to achieve them. requirements. Their conduct (price setting,
advertising and interprofessional cooperation)
Romania already uses elements to is also regulated more strictly than in most EU
facilitate knowledge transfer, but has to countries. In some circumstances, notaries
complement them. Technology transfer have been colluding on their tariffs because of
price controls (9). Accountants and tax advisors
entities were created to connect researchers
must be member of the respective chambers
and companies interested in applying the
and are subject to numerous minimum
results of research projects, and to develop
education and training requirements, on top of
intellectual properties for academic staff.
the mandatory professional exams. The
Despite a slight increase in funding for public-
Romanian Competition Council is actively
private partnerships and technology transfer
encouraging the removal of excessive red tape
activities, these entities remain underfunded
and barriers to markets for services -
and seem to operate without a clear strategic
especially notaries and, more recently,
direction. Technology transfer offices within
accountants.
universities are still small, their personnel is
largely not trained and there is no common
structure to coordinate and steer their
(8) OECD-EC (2019)
activities (7).
(9) WB (2020), OECD (2022) and the European
Commission Staff Working Document (SWD(2021)185)
accompanying the Communication on taking stock of
and updating the reform recommendations for
(7) EC (2017) regulation in professional services of 2017.

10
Reassessing barriers to entry could be exclusion in the EU. The ratio between the top
beneficial. Identifying requirements that can and bottom 20% of the income distribution
effectively guarantee a minimum quality (S80/S20) remains among the highest in the
standard, while scrapping those that are EU in 2020. Disadvantaged groups such as
excessively discriminatory, could support undeclared workers, the self-employed in
competition and benefit consumers – and agriculture, Roma, persons with disabilities,
companies alike. older people and the homeless are among the
worst affected and are facing a level of risk
Poor access to finance is another crucial above the EU average. For the Roma
factor undermining the competitiveness population in particular, initiatives for effective
of Romanian companies. On the supply side, integration into the labour market and for
large banks dominate the financial sector and effective coverage by public services are
require high credit standards. On the demand limited. Child poverty increased from 40% in
side, a large share of companies is either 2019 to 41.5% in 2020 and remains among
undercapitalised or has an equity below the the highest in the EU. Energy poverty of
regulatory minimum. Start-ups often face vulnerable households is high with limited
unstable revenue and collateral. Poor financial support to help them tackle the impact of
education among enterprises (and citizens) is increased energy prices. The Romanian
another key obstacle to the development of authorities adopted a legal framework for the
financial markets. As a consequence, financial protection of vulnerable consumers (Law No
intermediation remains low, especially for 226/2021) which brings additional support for
domestic companies in non-metropolitan those at risk due to the energy price increases.
areas (10). Tackling these challenges is key for Romania
to contribute to achieving the 2030 EU
Financial intermediation needs to adapt headline target on poverty reduction.
to market characteristics. Incentives to
attract business angels, and private equity and Access to essential and social services
venture capital funds, which are currently not remains insufficient, with significant
widespread (see Annex 10), could help rural-urban and regional disparities.
diversify the financial sector. Microcredit, Social transfers have a very low impact on
though currently scattered and fragmented, poverty reduction (15.8% in 2020 compared to
can encourage entrepreneurship, especially in the EU average of 32.4%). The “minimum
remote areas (11). Finally, the National inclusion income” reform under the RRP to
Development Bank, to be set up under the RRP, improve the efficiency of the current social
is expected to facilitate access to finance for assistance benefits is expected to be
SMEs and to encourage the incubation and progressively rolled out from 2022.
acceleration of start-ups.
The activation measures provided by the
public employment services (PES),
including upskilling and re-skilling,
Improving access to social remain limited. The proportion of PES clients
services, including active labour benefiting from training is declining, as are
market policies, and education for activity rates. The overall participation in
activation measures remains among the
disadvantaged groups lowest in the EU. In 2019, only around 8% of
the people registered as unemployed
Certain societal groups face severe benefitted from activation measures and even
less benefited from trainings. Support for the
poverty. Romania has one of the highest
unemployed consists primarily of employment
shares of people at risk of poverty or social
subsidies. The share of adults participating in
learning activities, at 4.9% in 2021, is among
(10) OECD (2022) the lowest in the EU, and only 28% have at
(11) OECD (2022)
least basic digital skills (compared to the EU

11
average of 54% in 2021). Consequently, the minimum pass mark (11% in urban
labour shortages and skills mismatches schools). The state of educational
persist (12). Targeted measures (e.g., upskilling infrastructure in rural areas is worse than in
and reskilling) are clearly needed, including urban settings, including buildings,
substantially increasing the capacity of PES to laboratories, and internet connections.
provide individualised pathways and
integrated approaches. Cooperation with social Graph 3.2: Low achievement in reading by
partners and other relevant actors is crucial socioeconomic status
for delivering results. The quality and scope of
social dialogue remains limited and social 70%

partners are rarely involved in defining 60%

reforms or policy developments.
50%

Educational outcomes are low overall, but 40%

particularly among disadvantaged 30%

groups. Lack of basic skills, measured by the
20%
PISA test, is high across the board, even
among students from advantaged socio- 10%

economic backgrounds, and points to 0%

structural challenges hampering the quality of EU27 RO

education. Still, the gap in low achievement Students in the top socioeconomic quartile
All students
between students from the upper and the Students in the bottom socioeconomic quartile

lower socio-economic quartile is one of the Source: European Commission

widest in the EU (see Graph 3.2), suggesting a
strong connection between socio-economic Disparities in access to good quality
status and educational outcomes. education have widened during the
Furthermore, disadvantaged students tend to pandemic. Romania is experiencing one of the
concentrate in certain schools, leading to
highest rates of early school leaving in the EU
segregation. More than 50% of Roma children
(15.3% in 2021, compared to an EU average
aged 6-15 attend schools where the majority
of 9.7%). Between 2020 and 2021, the rate
of students are Roma (13). Socio-economic has remained relatively stable. However, the
status also affects students’ expectations of effects of the COVID-19 crisis could worsen
their future achievements (14). Measures to the risk of early school leaving, which is
improve equity in education and provide already particularly affecting those from
support services to disadvantaged students disadvantaged groups, including Roma and
remain weak. those in rural areas. The crisis therefore
creates further risks to educational outcomes
Rural-urban disparities in education
and inequalities, due to the extended school
persist. More than 40% of Romania’s primary closures and the difficulties for many students
and lower secondary-aged children attend to access and effectively engage in remote
schools in rural areas, which have lower learning, particularly disadvantaged groups.
educational outcomes. In 2021, 37% of
eighth-graders from schools in rural areas Teachers continue to face considerable
who sat the national evaluation did not obtain challenges. While some important steps have
already been taken to strengthen the teaching
(12) Approximately 36% of workers do not work in the field profession, initial and continuous teacher
of their studies, leading the EU mismatch (EU average
28.6%).
education is not sufficiently aligned with
classroom needs, and supporting
(13) Roma Survey 2021, EU Agency for Fundamental rights
improvements on practical-experience is still
(Forthcoming)
largely needed. Attracting highly qualified
(14) Among 15 year-olds sitting the PISA test in 2018, only teachers and support specialists to
33% in the poorest quartile expect to pursue higher
education, compared to 87.3% among more disadvantaged schools also remains a
advantaged students. challenge.

12
Improving quality and equity in education of the highest in the EU, but is mostly financed
remains as a challenge. Romania is still through the transferred state budget. Absence
among the worst performers in the EU in of ownership, coupled with management
meeting the targets set out in the European deficiencies, eventually results into poor
Education Area strategic framework (see quality local services and infrastructure. At the
Annex 13). Further measures are therefore same time, the unpredictable distribution of
needed to address some of the serious and equalisation grants undermines local
longstanding challenges in the country’s authorities’ capacity to plan ahead. Providing
education sector. local authorities with their own tax
instruments and tax base could enhance
accountability and ownership at local level,
improving public services.
Strengthening local capacity
The completion of the cadastre would
broaden the property tax base and
Local authorities in Romania have limited increase local authorities’ own revenues.
own resources. Since 1990, the central Around 42% of real estate properties in
government has decentralised responsibilities Romania are registered in the integrated IT
to local governments providing them with system for the cadastre and land book. Taxes
sources of revenues, which remain very low on buildings and on land are the main source
compared to other Member States. of own resources for local authorities, which
Subnational expenditure needs are covered enjoy some discretion in setting rates within
disproportionally by usually earmarked an allowable range set out in the tax code.
transfers from the central government (See Revenues from property tax remain small (see
Graph 3.3). The scope of their use is therefore Annex 18). This is partly due to the weak link
limited and outside local administrations’ between recurrent taxes on immovable
control (15). property and housing values (16).

Graph 3.3: Subnational revenues by source

90
Energy-related challenges due to
Share of subnational revneues, by main source

the geopolitical situation should

80

70

60
encourage European security of
50 supply
40

30
Given the current geopolitical situation,
20
Romania faces energy-related challenges.
10
Fossil fuels still make up a large share of the
0
Grants & Tax revenue Tariffs & fees Property
energy mix (70% of the energy mix, and oil
subsidies income and natural gas accounts for nearly 60%),
Romania EU27 while the share of renewable power remains
limited (20%). Romania is the second largest
Source: European Commission
gas producer in the EU, serving mostly the
domestic market, but still imports gas from
This fiscal set-up does not empower local Russia during winter times. According to 2020
authorities. In fact, it makes them act like data, Russian imports of natural gas was 45%
spending agents on behalf of the central of total gas imports for Romania. (17) In order
government, rather than independent
administrative units. Local direct investments
(16) OECD (2022)
as a share of subnational expenditure is one
(17) Eurostat (2020), share of Russian imports over total
imports of natural gas. Total imports include intra-EU
(15) SNG-WOFI (2018) trade.

13
to reduce dependency on fossil fuels and to country’s building stock. A better management
ensure a stable gas supply, Romania needs to of energy consumption of fossil fuel units in
further diversify its energy mix, improve its industry and heating system can foster further
energy efficiency and increase interconnection energy consumption savings, benefitting both
capacity. Moreover, off-shore gas discoveries citizens and companies alike.
in the Black Sea could reduce Romania’s
dependency on Russian natural gas and allow Research and innovation will be essential
the country to challenge Russia’s dominance for the energy transition. Beyond the
of the regional energy market with exports. In uptake of existing technologies, research and
addition, Romania is planning to further invest innovation is critical for delivering novel and
in nuclear power. disruptive renewable energy technologies and
energy storage solutions to underpin the
Romania has committed to phase out transition. Suitable financial allocations,
most of its coal-fired generation capacity coupled with clearly articulated research and
(85%) by 2025 and to fully phasing out innovation objectives and funding targets are
coal by 2032. To achieve this ambitious instrumental.
target, the RRF and other EU funds, such as
the Modernisation Fund, include significant
decarbonisation investments in the installation
of new renewable energy capacity. However,
the green transition and the steep forecasted
increase in energy consumption will require
significant upgrades in energy transmission
networks and speeding up the deployment of
green infrastructure investment. Infrastructure
to ensure security of supply is of utmost
importance. To further support the climate and
energy transition, other sources of funding
could be used such as the EU ETS revenues.

Romania has an electricity

interconnection capacity lower than 10%,
which could be increased via projects
with neighbouring countries. To increase its
renewable energy share, the country’s RRP
includes significant investments and major
reform projects that will take some years to be
fully implemented as well as new projects to
support the production of hydrogen. Regarding
gas, Russian imports come via Ukraine.
Romania is connected to other countries, for
example Hungary and Bulgaria, but no
alternative routes or LNG exists for now.

The old building stock requires energy

renovation works to increase energy
efficiency. Measures should focus on
substantially increasing energy performance
so as to rapidly lower energy demand. While
the Romanian RRP envisages the renovation of
2.4 million m2 and 4.4 million m2 for public and
residential buildings, respectively, this surface
area only accounts for a fraction of the

14
KEY FINDINGS

Romania’s recovery and resilience plan  Addressing the regional disparities in

includes measures to address a series of access to social services, in particular in
structural challenges through: rural areas.

 Reforms aimed at boosting tax collection,  Improving the situation of vulnerable

improving public expenditure management groups by enhancing skills and providing
and increasing fiscal sustainability of the more effective activation measures,
public pension system, while increasing its including by significantly strengthening the
fairness. capacity of the Public Employment Services
to provide targeted and integrated support.
 Promotion of zero-emission road transport Increase attractiveness of professional and
and modal shift to more sustainable adult training. Fostering equal opportunities
transport modes, such as railways and in the education system by enhancing the
inland waterways; modernisation and quality and inclusiveness, in particular for
renewal of railways infrastructure and Roma of both early childhood education
support to public transport, to improve and the school system. Reduce the
sustainability and air quality. imbalance of schooling quality between
urban and rural areas.
 Commitment to phase out coal and lignite-
fired power production by 2032 and to  Putting an end to the excessive deficit
concrete targets for renewable energy situation by 2024 at the latest, by means
production. of a budgetary consolidation with the
objective to secure a lasting correction on
 Digitalisation of public administration and the excessive deficit, while being geared
public services, including the creation of a towards enhancing the quality of the public
government cloud. finances and reinforcing the growth
potential of the economy.
 Reform of the pension system and of the
minimum wage.  Reduce overall reliance on fossil fuels and
diversify imports of fossil fuels, speed up
Beyond the reforms and investments in the deployment of green infrastructure
the RRP, Romania would benefit from: investment, upgrade energy transmission
grids, frontload investment in
 Making the market of services to interconnection with neighbouring countries
businesses more open and competitive. to increase security of supply and increase
Remove unnecessary regulatory barriers to pace and ambition of renovations to
access certain professions, notably advance energy efficiency of building stock
notaries, architects and accountants. and decarbonisation of industry.

 Improving the relationship between

scientific research and the industry by
creating appropriate research and
development partnerships.

15
ANNEXES
LIST OF ANNEXES

Cross-cutting progress indicators 21

Annex 1: Sustainable Development Goals 21

Annex 2: Recovery and Resilience Plan - implementation 23

Annex 3: Other EU instruments for recovery and growth 24

Annex 4: Progress in the implementation of country-specific recommendations 26

Environmental sustainability 29

Annex 5: Green Deal 29

Annex 6: Employment and social impact of the green transition 33

Productivity 36

Annex 7: Resource efficiency and productivity 36

Annex 8: Digital transition 38

Annex 9: Innovation 40

Annex 10: Industry and single market 42

Annex 11: Public administration 44

Fairness 46

Annex 12: Employment, skills and social policy challenges in light of the European Pillar of Social Rights 46

Annex 13: Education and skills 48

Annex 14: Health and health systems 50

Annex 15: Economic and social performance at regional level 52

Macroeconomic stability 54

Annex 16: Key financial sector developments 54

Annex 17: Macroeconomic Imbalance Procedure assessment matrix 56

Annex 18: Taxation 58

Annex 19: Key economic and financial indicators 60

Annex 20: Debt sustainability analysis 61

References 63

LIST OF TABLES
Table A2.1: Key elements of the Romanian RRP 23
Table A4.1: Summary table on 2019, 2020 and 2021 CSRs 27
Table A5.1: Indicators underpinning progress on the European Green Deal from a macroeconomic perspective 32
Table A7.1: Selected resource efficiency indicators 37

19
 Table A8.1: Key Digital Economy and Society Index Indicators 39
Table A9.1: Key research, development and innovation indicators 41
Table A10.1: Key Single Market and Industry Indicators 43
Table A11.1: Public administration indicators – Romania 45
Table A13.1: EU-level targets and other contextual indicators under the European Education Area strategic framework 49
Table A14.1: Key health indicators 51
Table A15.1: Selected indicators at regional level – Romania 53
Table A16.1: Financial soundness indicators 54
Table A17.1: Assessment of Macroeconomic Imbalances matrix 57
Table A18.1: Taxation indicators 59
Table A19.1: Key economic and financial indicators 60
Table A20.1: Debt sustainability analysis for Romania 61
Table A20.2: Heat map of fiscal sustainability risks for Romania 62

LIST OF GRAPHS
Graph A1.1: Progress towards SDGs in Romania in the last five years 22
Graph A2.1: Share of RRF funds contributing to each policy pillar 23
Graph A3.1: ESIF 2014-2020 Total budget by fund (EUR billion, % of total) 24
Graph A3.2: Cohesion policy contribution to the SDGs (EUR billion) 25
Graph A4.1: Romania’s progress on the 2019-2020 CSRs (2022 European Semester cycle) 26
Graph A5.1: Fiscal aspects of the green transition Taxation and government expenditure on environmental protection 29
Graph A5.2: Share in energy mix (solids, oil, gas, nuclear, renewables) 30
Graph A5.3: Terrestrial protected areas and organic farming 30
Graph A5.4: Mobility Share of zero emission vehicles 31
Graph A6.1: Fair green transition challenges 33
Graph A6.2: Energy poverty by income decile 34
Graph A7.1: Circular economy: economic importance and expansion 36
Graph A11.1: E-government benchmark scores (lhs) and e-government users (rhs) 44
Graph A11.2: Performance on the single market public procurement indicator 44
Graph A14.1: Life expectancy at birth, years 50
Graph A14.2: Projected increase in public expenditure on health care over 2019-2070 (AWG reference scenario) 50
Graph A15.1: Real GVA per worker 52
Graph A15.2: Territories most affected by climate transition – Romania 53
Graph A18.1: Tax wedge indicators (2021) 58

20
CROSS-CUTTING PROGRESS
ANNEX 1: SUSTAINABLE INDICATORS
DEVELOPMENT GOALS
ANNEX 1: SUSTAINABLE DEVELOPMENT GOALS
This annex assesses Romania’s progress on concerning as women’s participation in the labour
the Sustainable Development Goals (SDGs) market remains low: the gender employment gap
along the four dimensions of competitive increased from 17.7 pps to 19.3 pps between
sustainability. The 17 SDGs and their related 2015 and 2020 while it remained stable at around
indicators provide a policy framework under the 11 pps during the same period in the EU. Romania
UN’s 2030 Agenda for Sustainable Development. also needs to catch up on the quality of education
The aim is to end all forms of poverty, fight as participation in early childhood education
inequalities and tackle climate change, while decreased by 6.6% between 2014 and 2019
ensuring that no one is left behind. The EU and its (against a stable EU trend). Measures in the RRP to
Member States are committed to this historic digitalise education and a system of grants to
global framework agreement and to playing an reduce the drop-out rate will help to address these
active role in maximising progress on the SDGs. challenges.
The graph below (18) is based on the EU SDG
indicator set, developed to monitor progress on Romania is improving on some indicators
SDGs in an EU context. related to productivity (SDGs 8 and 9) but
needs to catch up on others (SDG 4). Romania
While Romania performs very well or is has performed well, halving its long-term
improving on several SDG indicators related unemployment rate between 2015 and 2020
to environmental sustainability (SDGs 2, 9, bringing it to below the EU average in 2020 (1.5%
6, 11, 12, 13 and 15), it still needs to catch vs 2.4%). However, it also shows low and stable
up (SDG 12) or to maintain its progress (SDG public expenditure on R&D (0.47% in 2020 vs an
EU average of 2.32%) which affects industrial
7) on others. On responsible consumption and
capabilities and its patent production. Tertiary
production, Romania has been performing poorly.
educational achievement (at 24.9% in 2020) is
Its circular material use rate is declining while the
also declining in contrast with the general growth
EU as a whole has progressed substantially (1.3%
in the EU over the past 5 years. To address
vs12.8% in in 2020). The material footprint of the
challenges linked to productivity, the RRP plans to
Romanian economy has also significantly
upgrade and digitalise university infrastructure,
increased (almost by a third) since 2015 while it
giving grants for IT laboratories and smart hubs
remained stable in the EU. Performance on other
and developing open educational resources.
indicators linked to climate action, life on land and
the sustainability of cities and communities has Romania is improving on SDG indicators
been more positive. The RRP will further help
related to growth and employment (SDG 8)
Romania to address its current challenges notably
but weaknesses on rule of law and corruption
with strong reforms to support the circular
economy and improve waste management but perception persist (SDG 16). GDP per capita has
also with flagship reforms on the phasing out of progressed somewhat faster than the EU average
coal and the decarbonisation of road transport. (by 21% vs 1.7%), as has the employment rate.
The situation is mixed regarding institutions and
While Romania is improving on most SDG there are continued concerns about respect for the
indicators related to fairness (SDGs 1, 2, 3, 8 rule of law. The percentage of the population
and 10), it still needs to catch up on others reporting crime or violence fell by a third between
2015 and 2020 and at 8.8% and is lower than the
(SDGs 4 and 5). Poverty and deprivation
EU average (11% in 2021). The RRP is expected to
decreased and basic health outcomes improved in
increase the effectiveness of the judicial system
general between 2015 and 2020. However,
and the fight against corruption and to contribute
Romania’s track record on gender equality is
to improving trust in public administration.

(18) For detailed datasets on the various SDGs see the annual
ESTAT report ‘Sustainable development in the European
Union’, https://ec.europa.eu/eurostat/web/products-statistical-
books/-/KS-03-21-096; Extensive country specific data on
the short-term progress of Member States can be found
here: https://ec.europa.eu/eurostat/product?code=KS-09-22-
019.

21
Graph A1.1: Progress towards SDGs in Romania in the last five years

Chart Title

20.00

0.00
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17
-20.00

-40.00

-60.00

-80.00

-100.00

-120.00

For detailed datasets on the various SDGs see the annual ESTAT report ‘Sustainable development in the European Union’,
https://ec.europa.eu/eurostat/web/products-statistical-books/-/KS-03-21-096; Extensive country specific data on the short-term
progress of Member States can be found here: Key findings - Sustainable development indicators - Eurostat (europa.eu)
Source: Eurostat, latest update of 28 April 2022. Data mainly refer to 2015-2020 and 2016-2021.

22
ANNEX 2: RECOVERY AND RESILIENCE PLAN - IMPLEMENTATION
The Recovery and Resilience Facility (RRF) is Table A2.1: Key elements of the Romanian RRP
the centrepiece of the EU’s efforts to Total allocation EUR 14.2 billion in grants (6.5% of 2019 GDP)
support its recovery from the COVID-19 and EUR 14.9 billion in loans
pandemic, fast forward the twin transition Investments
Reforms
and 122 investments and 64 reforms

and strengthen resilience against future Total number of 507

shocks. Romania submitted its recovery and Milestones and Targets
Estimated macro Raise GDP by 1.8%-2.9% by 2026 (0.2% in
resilience plan (RRP) on 31 May 2021. The economic impact (1)  spillover effects)
Commission’s positive assessment on 28 Pre-financing disbursed EUR 1.8 billion in grants (December 2021) and
September 2021 and the Council’s approval on 29 EUR 1.9 billion in loans (January 2022)
First instalment Romania did not yet submit a first payment
October 2021 paved the way for disbursing EUR request
14.2 billion in grants and EUR 14.9 billion in loans (1) See Pfeiffer P., Varga J. and in ’t Veld J. (2021),
under the RRF in 2021-2026. The financing and “Quantifying Spillovers of NGEU investment”, European
Economy Discussion Papers, No. 144 and Afman et al. (2021),
the loan agreements were signed on 25 November
“An overview of the economics of the Recovery and Resilience
2021 and 15 December 2021 respectively. The Facility”, Quarterly Report on the Euro Area (QREA), Vol. 20,
key elements of the Romanian RRP are set out in No. 3 pp. 7-16.
Table A2.1. The share of funds contributing to Source: European Commission 2022.
each of the RRF’s six policy pillars is outlined in
graph A2.1.

Graph A2.1: Share of RRF funds contributing to each policy pillar

70%

60%

50%

40%

30%

20%

10%

0%
Green transition Digital transformation Smart, sustainable and Social and territorial Health, and economic, Policies for the next
inclusive growth cohesion social and institutional generation
resilience

(1) Each measure contributes towards two policy areas of the six pillars, therefore the total contribution to all pillars displayed on
this chart amounts to 200% of the estimated cost of the 22 RRPs approved in 2021. The bottom part represents the amount of
the primary pillar, the top part the amount of the secondary pillar.
Source: RRF Scoreboard
https://ec.europa.eu/economy_finance/recovery-and-resilience-scoreboard/country_overview.html

23
ANNEX 3: OTHER EU INSTRUMENTS FOR RECOVERY AND GROWTH
The EU’s budget of more than EUR 1.2 trillion spent by the end of 2023 (23). Of the 11 objectives
for 2021-2027 is the investment lever to the most relevant ones for cohesion policy funding
help implement EU priorities. Underpinned by in Romania are network infrastructure in transport
an additional amount of about EUR 800 billion and energy, environment protection and resource
through NextGenerationEU and its largest efficiency, sustainable and
instrument, the Recovery and Resilience Facility, it quality employment and social inclusion and low
represents significant firepower to support the carbon economy (in total EUR 19.05 billion). By the
recovery and sustainable growth. end of 2020, cohesion policy investments had
supported to more than 4 500 firms and helped
In 2021-2027, EU cohesion policy funds (19) improve the water supply of more than 300 000
will support long-term development people and the energy efficiency of more than
objectives in Romania by investing EUR 32.45 33 000 households. European Social Fund (ESF)
billion (20), including EUR 2,139.7 million from the policy investments supported more than 120 000
unemployed and inactive people, provided 56 000
Just Transition Fund to alleviate the socio-
economic impacts of the green transition in the vulnerable people with integrated services and
most vulnerable regions. The 2021-2027 cohesion 480 000 people benefited from preventive
policy funds partnership agreements and healthcare services and trained more than 41 000
programmes take into account the 2019-2020 teachers, in particular to address the needs of
country-specific recommendations and investment vulnerable groups. In addition, more than 17
million food and hygiene packages were
guidance provided as part of the European
Semester, ensuring synergies and distributed to socially vulnerable people.
complementarities with other EU funding. In
addition, Romania will benefit from EUR 15.1 Graph A3.1: ESIF 2014-2020 Total budget by fund
billion support for the 2023-27 period from the (EUR billion, % of total)
Common Agricultural Policy, which supports social, 0.33
environmental, and economic sustainability and 5.44
1%
7.69
innovation in agriculture and rural areas, 13% 19%

contributing to the European Green Deal, and

ensuring long-term food security.

In 2014-2020, the European Structural and

Investment Funds for Romania are set to
invest EUR 34.76 billion (21) from the EU 12.70
budget. The total investment including national 14.59
31%
36%
financing amounts to EUR 40.97 billion (Graph
A3.1), representing around 3.09% of GDP for
2014-2020 and 58.03% of public investment (22). 0.22
By 31 December 2021, 128% of the total was 0%
CF EAFRD EMFF ERDF ESF YEI
allocated to specific projects and 54% was
reported as spent, leaving EUR 18.76 billion to be (1) ESIF includes cohesion policy funds (ERDF, ESF+, CF,
Interreg), the European Agricultural Fund for Rural
Development (EAFRD) and the European Maritime and
(19) European Regional Development Fund (ERDF), European Fisheries Fund (EMFF). According to the ‘N+3 rule’, the funds
Social Fund+ (ESF+), Cohesion Fund (CF), Just Transition Fund committed for 2014-2020 must be spent by 2023 at the
(JTF), Interreg. latest (by 2025 for EAFRD).
Source: Cohesion Open data, cut-off date 31.12.2021 for
(20) Current prices, source: Cohesion Open Data ERDF, ESF+, CF, Interreg; cut-off date 31.12.2020 for EAFRD
(21) ESIF includes cohesion policy funds (ERDF, ESF+, CF, Interreg) and EMFF.
and European Agricultural Fund for Rural Development
(EAFRD) and European Maritime and Fisheries Fund (EMFF). Cohesion policy funds are already
According to the ‘N+3 rule’, the funds committed for the
years 2014-2020 must be spent by 2023 at latest (by 2025 substantially contributing to the Sustainable
for EAFRD). Data source: Cohesion Open data , cut-off date Development Goals (SDGs) objectives. In
31.12.2021 for ERDF, ESF+, CF, Interreg; cut-off date
31.12.2020 for EAFRD and EMFF.
(22) Public investment is gross fixed capital formation plus (23) Including REACT-EU. ESIF data on
capital transfers, general government. https://cohesiondata.ec.europa.eu/countries/RO

24
Romania, cohesion policy funds (Graph A3.2) enabling Romania to re-allocate resources for
support 11 of the 17 SDGs with up to 93% of the immediate public health needs (470 million) and
expenditure contributing to the attainment of the to support businesses (550 million). For instance,
goals. Romania redirected fund to purchase protective
equipment and healthcare material, reinforce
Graph A3.2: Cohesion policy contribution to the healthcare staff, provide working capital for SMEs,
SDGs (EUR billion) support digitalisation of the education system
through purchase of IT equipment and provide
SDG 9 8.50 subsidies for technical unemployment. Romania
SDG 8 5.03
also benefited from the temporary 100% EU
financing of cohesion policy measures, with
SDG 6 2.62
approximately EUR 463 million in 2021 through
SDG 3 2.17 100% co-financing.
SDG 7 1.62

SDG 4 1.39 Romania received support under the

SDG 1 1.14 European instrument for temporary support
SDG 11 0.84
to mitigate unemployment risks in an
SDG 13 0.41
emergency (SURE) to finance short-time
work schemes, similar measures and as an
SDG 15 0.40
ancillary, health-related measures. The
SDG 12 0.37
Council granted financial assistance under SURE to
0 5 10
Romania in September 2020 for a maximum of
(1) SDG 1 No poverty, SDG 3 Good health and well being, SDG EUR 4.099 billion, 73% of which was disbursed by
4 Quality education, SDG 6 Clean water and sanitation, SDG 7 2 May 2022. SURE is estimated to have supported
Affordable and clean energy, SDG 8 Decent work and approximately 15% of workers and 10% of firms
economic growth, SDG 9 Industry, innovation, infrastructure,
SDG 11 Sustainable cities and communities, SDG 12
for at least one month in 2020 and 2% of workers
Responsible consumption and production, SDG 13 Climate and 1% of firms in 2021, primarily in
action, SDG 15 Life on land accommodation and food services, professional,
Source: European Commission, DG REGIO. scientific and technical activities, and construction.
Romania is estimated to have saved a total of EUR
The REACT-EU instrument (Recovery 0.85 billion on interest payments as a result of
Assistance for Cohesion and the Territories SURE’s lower interest rates.
of Europe) under NextGenerationEU provided
EUR 1 540 million of additional funding to The Commission provides tailored expertise
2014-2020 cohesion policy allocations for to Romania under the Technical Support
Romania to ensure a balanced recovery, boost Instrument. As of 2022 Romania receives help
convergence and provide vital support to regions with building its capacity to implement specific
following the coronavirus outbreak. REACT-EU reforms and investments in the RRP, for instance
provided support in Romania to SMEs in the form for enhancing policy coherence, transparency and
of working capital and productive investments. It coordination at the centre of the government. New
contributed to the short-time work schemes, technical support projects will contribute, among
reinforced the health care system, strengthened others, to enhance gender mainstreaming in public
education, training and skills development, policy and the budgetary processes. The country
promoted energy efficiency and reduced material will benefit from additional RR-related technical
deprivation with direct food delivery. support, to develop a national hydrogen strategy
and action plan and to set up and run a corporate
The Coronavirus Response Investment governance mechanism in state-owned
Initiative (24) provided the first EU emergency enterprises.
support to Romania for the COVID-19
Romania also benefits from other EU
pandemic. It introduced extraordinary flexibility
programmes such as the Connecting Europe
(24) Re-allocating ESIF resources according to Regulation (EU)
Facility, which allocated EUR 985.3 million to
2020/460 of the European Parliament and of the Council of specific projects on strategic transport networks,
30 March 2020, and Regulation (EU) 2020/558 of the and Horizon 2020, which allocated EU funding of
European Parliament and of the Council of 23 April 2020. EUR 299.8 million.

25
ANNEX 4: PROGRESS IN THE IMPLEMENTATION OF COUNTRY-SPECIFIC
RECOMMENDATIONS
The Commission assessed the 2019-2021 Graph A4.1: Romania’s progress on the 2019-2020
country-specific recommendations (CSRs) (25) CSRs (2022 European Semester cycle)
addressed to Romania in the context of the
Full Implementation No
European Semester. The assessment takes into 3% Progress
Substantial
account the policy action taken by Romania to Progress 3%
date (26), as well as the commitments in the 6%
Recovery and Resilience Plan (RRP) (27). At this
early stage of the RRP implementation, overall
27% of the CSRs focusing on structural issues in
2019 and 2020 have recorded at least “some Some
Progress
progress”, while 73% recorded “limited” or “no 18%
progress” (see Graph A4.1). Considerable
additional progress in addressing structural CSRs
is expected in the years to come with the further
implementation of the RRP. Limited
Progress
70%

Source: European Commission

(25) 2021 CSRs: https://eur-lex.europa.eu/legal-

content/EN/TXT/?uri=CELEX%3A32021H0729%2823%29&qi
d=1627675454457
2020 CSRs: EUR-Lex - 32020H0826(23) - EN - EUR-Lex
(europa.eu)
2019 CSRs: EUR-Lex - 32019H0905(23) - EN - EUR-Lex
(europa.eu)
(26) Incl. policy action reported in the National Reform
Programme, as well as in the RRF reporting (bi-annual
reporting on the progress with implementation of milestones
and targets and resulting from the payment request
assessment).
(27) Measures foreseen in the annex of the adopted Council
Implementing Decision on the approval of the assessment of
the RRP which are not yet adopted nor implemented but
considered as credibly announced, in line with the CSR
assessment methodology, warrant “limited progress”. Once
implemented, these measures can lead to “some/substantial
progress” or “full implementation”, depending on their
relevance. Member States were asked to effectively address
all or a significant subset of the relevant country-specific
recommendations issued by the Council in 2019 and 2020 in
their RRPs. The CSR assessment presented here takes into
account the degree of implementation of the measures
included in the RRP and of those done outside of the RRP at
the time of assessment.

26
Table A4.1: Summary table on 2019, 2020 and 2021 CSRs
Romania Assessment in May 2022* RRP coverage of CSRs until 2026
2019 CSR1 Limited Progress

Ensure compliance with the Council recommendation of 14 June

2019 with a view to correcting the significant deviation from the Not relevant anymore Not applicable
adjustment path toward the medium-term budgetary objective.

Ensure the full application of the fiscal framework. No Progress

Relevant RRP measures planned as of
Strengthen tax compliance and collection. Limited Progress
2022
2019 CSR 2 Some Progress
Safeguard financial stability and the robustness of the banking
Substantial Progress
sector.
Relevant RRP measures being
Ensure the sustainability of the public pension system and Limited Progress implemented as of 2021 and planned as of
2022 and 2023
the long-term viability of the second pillar pension funds. Some Progress
2019 CSR 3 Limited Progress
Relevant RRP measures being
Improve the quality and inclusiveness of education, in particular
Limited Progress implemented as of 2021 and planned as of
for Roma and other disadvantaged groups.
2022
Improve skills, including digital, notably by increasing the labour
Relevant RRP measures planned as of
market relevance of vocational education and training and higher Limited Progress
2022
education.
Relevant RRP measures planned as of
Increase the coverage and quality of social services and Limited Progress
2022

Relevant RRP measures planned as of

complete the minimum inclusion income reform. Limited Progress
2022
Relevant RRP measures planned as of
Improve the functioning of social dialogue. Limited Progress
2022
Ensure minimum wage setting based on objective criteria,
Limited Progress Relevant RRP measures planned in 2024
consistent with job creation and competitiveness.

Relevant RRP measures being

Improve access to and cost-efficiency of healthcare, including
Limited Progress implemented as of 2021 and planned as of
through the shift to outpatient care.
2022 and 2023
2019 CSR4 Some Progress
Focus investment-related economic policy on transport, notably
Relevant RRP measures being
on its sustainability, low carbon energy and energy efficiency,
Some Progress implemented as of 2021 and planned as of
environmental infrastructure as well as innovation, taking into
2022 and 2023
account regional disparities.
Relevant RRP measures being
Improve preparation and prioritisation of large projects and
Some Progress implemented as of 2021 and planned as of
accelerate their implementation.
2022 and 2023
Improve the efficiency of public procurement and ensure full and
Relevant RRP measures planned as of
sustainable implementation of the national public procurement Some Progress
2023
strategy.
2019 CSR 5 Limited Progress

Ensure that legilsative initiatives do not undermine legal certainty

Relevant RRP measures being
by improving the quality and predictability of decision-making,
Limited Progress implemented as of 2021 and planned as of
including by appropriate stakeholder consultations, effective
2022
impact assessments and streamlined administrative procedures.

Relevant RRP measures being

Strengthen the corporate governance of state-owned
Limited Progress implemented as of 2021 and planned as of
enterprises.
2022 and 2023
2020 CSR1 Limited Progress
Pursue fiscal policies in line with the Council’s recommendation
of 3 April 2020, while taking all necessary measures to effectively
Not relevant anymore Not applicable
address the pandemic, sustain the economy and support the
ensuing recovery.
Relevant RRP measures being
Avoid the implementation of permanent measures that would
Limited Progress implemented as of 2021 and planned as of
endanger fiscal sustainability.
2022
Strengthen the resilience of the health system, including in the Relevant RRP measures being
areas of health workers and medical products, and improve Limited Progress implemented as of 2021 and planned as of
access to health services. 2022
2020 CSR2 Limited Progress
Provide adequate income replacement and Substantial Progress
Relevant RRP measures planned as of
extend social protection measures and Limited Progress
2022
Relevant RRP measures being
extend access to essential services for all. Limited Progress implemented as of 2021 and planned as of
2022 and 2023
Mitigate the employment impact of the crisis by developing Relevant RRP measures planned as of
Limited Progress
flexible working arrangements and activation measures. 2024
Relevant RRP measures planned as of
Strengthen skills and digital learning and Limited Progress
2022
Relevant RRP measures being
ensure equal access to education. Limited Progress implemented as of 2021 and planned as of
2022 and 2023
(Continued on the next page)

27
 Table (continued)
2020 CSR 3 Limited Progress
Ensure liquidity support to the economy benefiting businesses Relevant RRP measures being
and households, particularly small and medium-sized enterprises Full Implementation implemented as of 2021 and planned as of
and the self-employed. 2022
Relevant RRP measures planned as of
Front-load mature public investment projects and Limited Progress
2022 and 2023
Relevant RRP measures being
promote private investment to foster the economic recovery. Some Progress implemented as of 2021 and planned as of
2022
Relevant RRP measures being
Focus investment on the green and digital transition, in particular
Limited Progress implemented as of 2021 and planned as of
on sustainable transport,
2022
Relevant RRP measures being
digital service infrastructure, Limited Progress implemented as of 2021 and planned as of
2022 and 2023
Relevant RRP measures being
clean and efficient production and use of energy and
Limited Progress implemented as of 2021 and planned as of
environmental infrastructure, including in the coal regions.
2022 and 2023
2020 CSR 4 Limited Progress
Improve the quality and effectiveness of public administration Relevant RRP measures planned as of
Some Progress
and 2022 and 2023
Relevant RRP measures being
improve the predictability of decision-making, including through
Limited Progress implemented as of 2021 and planned as of
an adequate involvement of social partners.
2022
2021 CSR1 Limited Progress
Pursue fiscal policies in line with the Council Recommendation of
18 June 2021 with a view to bringing an end to the situation of an Limited progress Not applicable
excessive government deficit in Romania.

* See footnote 27.

Source: European Commission

28
ENVIRONMENTAL SUSTAINABILITY
ANNEX 5: GREEN DEAL
The European Green Deal intends to Romania’s tax revenues are above the EU average
transform the EU into a fair and prosperous in terms of the share of total tax revenues, but
society, with a modern, resource-efficient below the EU average as share of GDP.
and competitive economy where there are no Environmental taxation is largely driven by energy
net emissions of greenhouse gases in 2050 taxes, with a smaller proportion attributed to
and where economic growth is decoupled transport and pollution taxes. Fossil fuel subsidies
have been steadily decreasing since 2016.
from resource use. This annex offers a snapshot
Meanwhile, the climate risk to public finances due
of the most significant and economically relevant
to uninsured assets is considered low-medium,
developments in Romania in the respective
with a significant share of uninsured climatological
building blocks of the European Green Deal. It is
losses (see Annex 18).
complemented by Annex 6 on the employment and
social impact of the green transition and Annex 7
Graph A5.1: Fiscal aspects of the green transition
for circular economy aspects of the Green Deal.
Taxation and government expenditure on
environmental protection
Romania significantly reduced its greenhouse
gas (GHG) emissions in previous decades but 8.0
more efforts will be needed to achieve the 7.0
new ambitions set out in the EU climate law. 6.0
The country’s total greenhouse gas emissions
5.0
(save land use) have decreased considerably since
1990. Emissions per capita are lower than the EU 4.0

average but the emissions intensity of the 3.0

economy is still twice as high as the EU average. 2.0
In 2020, emissions in sectors not covered by the 1.0
EU emissions trading system (ETS) were lower
0.0
than the 2020 target of limiting the increase to Environmental Environmental Government
+19% compared to 2005. However, Romania is taxes (% of GDP) taxes (% of total expenditure on
taxation) environmental
not likely to reach its current 2030 target for non- protection (% of
ETS emissions of -2% even with additional total expenditure)
RO (2020)
measures. Moreover, to reach the proposed ESR EU27 (2020)
target under the Fit for 55 package of -12.7% will
require considerable additional efforts. Under Source: Eurostat
current land management practices, Romania is
projected to see decreasing net removals by 2030. Romania is still largely reliant on fossil fuels
In its recovery and resilience plan (RRP), Romania in 2020 (Graph A5.2). Gross inland consumption
earmarks 41% of its allocation for climate is mainly driven by coal, lignite, oil and natural gas,
objectives and outlines crucial reforms and which accounts for nearly 71% in the energy mix.
investments to accelerate the transition to a more Nuclear accounts for 9% of the energy mix,
sustainable, low-carbon and climate-resilient renewables for around 20%. Both are planned to
economy. increase, while the share of fossil fuels is expected
to decline over time. In its RRP, Romania plans to
Romania has increased investment in phase out coal and lignite power by 2032 and
environmental protection and decreased further deploy renewables and hydrogen. The
fossil fuel subsidies, but there is still a long setting-up of additional renewable energy
way to go given the absorption and capacity capacities until 2030 of approximately 6.9 GW
issues. Progress on environmental tax collection is compared to 2020 is planned. For this to happen,
mixed (Graph A5.1). Environmental policy the reforms in the energy market and permitting
developments in Romania are mainly driven by EU included in the RRP are essential.
directives and Regulations, and the relevant EU
rules are generally transposed on time.
Implementation remains the main challenge, with
practical application proving to be difficult.

29
Graph A5.2: Share in energy mix (solids, oil, gas, targets on ozone concentration have not been met.
nuclear, renewables) Persistent breaches of air quality requirements, which
have severe negative effects on health and the
100
environment, are being followed up by the Commission
90
through infringement procedures. Romania has failed to
80 submit the latest air pollutant emission projections
70 required under the National Emission Reduction
60 Commitments Directive. Furthermore Romania it the only
50 Member State that has not submitted its National Air
40 Pollution Control Programme on the reduction of national
30 emissions of certain atmospheric pollutants. On nitrates
20
pollution of ground water, the situation seems to have
10
slightly improved. However, Romania has eutrophication
0
2005 2010 2015 2018 2019 2020 issues and some polluted hotspots. Romania designated
all its territory as sensitive areas and decided that
Renewables
Nuclear
agglomerations over 10 000 p.e. discharging into sensitive
Gas areas must apply biological treatment with nitrogen and
Oil
Solid fossil fuels, peat and oil shale
phosphorus removal.

(1) The energy mix is based on gross inland consumption, and Graph A5.3: Terrestrial protected areas and
excludes heat and electricity. The share of renewables
organic farming
includes biofuels and non-renewable waste
Source: Eurostat. 30

In biodiversity and ecosystem health, Romania 25

presents a mixed picture (Graph A5.3). The country

20
performs above the EU average on the share of Natura
2000 terrestrial protected areas but below the EU average 15
on utilised agricultural area under organic farming. Around
68% of the habitats and 46% of species were in good 10
conservation status. On birds, about 19% of breeding
species showed short-term increasing or stable population 5

trends while for the wintering species the share stood at

0
15%. The share of habitats and species in good 2016 2017 2019 2020
conservation status seems to have increased between the
Terrestrial protected areas (% total area)
two last reporting periods, however figures provided are Area under organic farming (% total utilised agricultural area)
not necessarily directly comparable because changes in EU27 (terrestrial)
EU27 (organic)
Romania’s conservation status may be due to changes in
methods or better data rather than reflecting genuine (1) For terrestrial protected areas data for 2018, and data for
changes. Agriculture put by far the greatest pressure on the EU average (2016, 2017) is lacking.
Source: EEA (terrestrial protected areas) and Eurostat
habitats while for species the main sources pf pressure
(organic farming).
were the development, construction and use of
infrastructure and the extraction and cultivation of living
On mobility, the share of zero-emission vehicles in
resources. Progress has been made on adopting
management plans for Natura 2000 sites but a number new car registration has increased substantially
are still missing, and the management of the sites is not over recent years but is still half the EU average
always effective. Forests cover 32.46% of Romania’s (Graph A5.4). The density of public charging points is
territory. above EU average; its accelerated expansion is vital to the
further development of electromobility. While only slightly
In terms of pollution, air quality in Romania more than a third of the overall rail network in Romania is
continues to be a severe concern. Emissions of key air electrified, the share reaches 98% for the Romanian part
pollutants have decreased significantly in Romania in of the TEN-T network, where most of the traffic is
recent years. In 2020, exceedances above air quality concentrated.
standards were registered for nitrogen dioxide in three air
quality zones and for particulate matter (PM10) in four
zones. Furthermore, for several air quality zones the

30
Graph A5.4: Mobility Share of zero emission
vehicles

10.0
% of new registrations

8.0

6.0

4.0

2.0

0.0
2016 2017 2018 2019 2020 2021

RO EU27

(1) Zero emission vehicles (passenger cars) include battery

and fuel cell electric vehicles (BEV, FCEV).
Source: European Alternative Fuels Observatory.

31
Table A5.1: Indicators underpinning progress on the European Green Deal from a macroeconomic
perspective
'Fit for 55'
Target Distance Target Distance
2005 2019 2020 2030 WEM WAM 2030 WEM WAM
Non-ETS GHG emission reduction target (1) MTCO2 eq; %; pp (2) 79.4 0% 0% -2% -1 1 -13% -12 -10
Progress to policy targets

National contribution to 2030

2005 2016 2017 2018 2019 2020 EU target
Share of energy from renewable sources in gross final
% 18% 25% 24% 24% 24% 24% 31%
consumption of energy (1)
(1)
Energy efficiency: primary energy consumption Mtoe 36.1 30.7 32.5 32.6 32.1 30.9 32.3
Energy efficiency: final energy consumption (1) Mtoe 24.6 22.2 23.3 23.6 23.9 23.5 25.7

ROMANIA EU
2015 2016 2017 2018 2019 2020 2018 2019 2020
Environmental taxes (% of GDP) % of GDP 2.5 2.4 1.9 2.0 2.1 1.9 2.4 2.4 2.2
Environmental taxes (% of total taxation) % of taxation (3) 8.8 9.3 7.8 7.6 8.1 7.3 6.0 5.9 5.6
Fiscal and financial
indicators

Government expenditure on environmental protection % of total exp. 2.65 1.76 1.49 2.10 2.00 1.61 1.66 1.70 1.61

Investment in environmental protection % of GDP (4) 1.03 0.36 0.24 0.34 0.31 - 0.42 0.38 0.41
Fossil fuel subsidies EUR2020bn 0.94 1.17 1.10 1.08 0.80 - 56.87 55.70 -
(5) 1.7 out of 4 (slight decrease from historical level of 1.8). This is a low/medium risk category (4 being a high
Climate protection gap score 1-4
risk).
Net GHG emissions 1990 = 100 47 46 44 44 43 41 79 76 69
Climate

GHG emissions intensity of the economy kg/EUR'10 0.82 0.77 0.74 0.71 0.66 0.65 0.32 0.31 0.30
Energy intensity of the economy kgoe/EUR'10 0.22 0.21 0.21 0.20 0.19 0.19 0.12 0.11 0.11
Final energy consumption (FEC) 2015=100 100.0 101.8 106.8 108.0 109.3 107.7 103.5 102.9 94.6
Energy

FEC in residential building sector 2015=100 100.0 100.5 104.8 105.4 105.1 108.6 101.9 101.3 101.3
FEC in services building sector 2015=100 100.0 102.5 105.5 112.2 111.4 104.1 102.4 100.1 94.4
(4)
Smog-precursor emission intensity (to GDP) tonne/EUR'10 (6) 2.87 2.49 2.28 2.21 2.17 - 0.99 0.93 -
Pollution

Years of life lost caused due to air pollution by PM2.5 per 100.000 inh. 1367 1277 1518 1522 1261 - 863 762 -

Years of life lost due to air pollution by NO2 per 100.000 inh. 71 141 212 211 215 - 120 99 -
Nitrate in ground water mg NO3/litre - - - - - - 21.7 20.7 -
Terrestrial protected areas % of total - 22.2 23.4 - 23.4 23.4 - 25.7 25.7
Marine protected areas % of total - 21.4 - - 21.5 - - 10.7 -
Biodiversity

% of total utilised
Organic farming 1.8 1.7 1.9 2.4 2.9 3.5 8.0 8.5 9.1
agricultural area

2000-2006 2006-2012 2012-2018 00-06 06-12 12-18

Net land take per 10,000 km2 3.7 4.8 6.9 13.0 11.0 5.0

2015 2016 2017 2018 2019 2020 2018 2019 2020

(7)
GHG emissions intensity of transport (to GVA) kg/EUR'10 0.46 0.42 0.42 0.41 0.42 0.45 0.89 0.87 0.83
(8)
Share of zero emission vehicles % in new registrations 0.0 0.1 0.2 0.4 1.0 2.3 1.0 1.9 5.4
Mobility

Number of plug-in electric vehicles per charging point 3 5 6 12 11 15 8 8 12

Share of electrified railways % 37.4 37.4 37.4 37.4 37.4 - 55.6 56.0 -
Congestion (average number of hours spent in road congestion per year by a
32.0 31.8 31.9 30.5 32.4 - 28.9 28.8 -
representative commuting driver)

Year RO EU
Share of smart meters in total metering points (9)
% of total 2018 4.8 35.8
- electricity
Digital

Share of smart meters in total metering points (9)

% of total 2018 0.0 13.1
- gas
ICT used for environmental sustainability (10) % 2021 67.9 65.9

(1) The 2030 non-ETS GHG target is based on the Effort Sharing Regulation. The FF55 targets are based on the COM proposal to
increase EU's climate ambition by 2030. Renewables and Energy Efficiency targets and national contributions under the
Governance Regulation (Regulation (EU) 2018/1999). (2) Distance to target is the gap between Member States’ 2030 target under
the Effort Sharing Regulation and projected emissions, with existing measures (WEM) and with additional measures (WAM)
respectively, as a percentage of 2005 base year emissions. (3) Percentage of total revenues from taxes and social contributions
(excluding imputed social contributions). Revenues from the ETS are included in environmental tax revenues (in 2017 they
amounted to 1.5% of total environmental tax revenues at the EU level). (4) Covers expenditure on gross fixed capital formation to
be used for the production of environmental protection services (i.e. abatement and prevention of pollution) covering all sectors,
i.e. government, industry and specialised providers. (5) The climate protection gap indicator is part of the European adaptation
strategy (February 2021), and is defined as the share of non-insured economic losses caused by climate-related disasters. (6)
Sulphur oxides (SO2 equivalent), Ammonia, Particulates < 10µm, Nitrogen oxides in total economy (divided by GDP). (7)
Transportation and storage (NACE Section H). (8) Zero emission vehicles include battery electric vehicles (BEV) and fuel cell
electric vehicles (FCEV). (9) European Commission Report (2019) 'Benchmarking smart metering deployment in the EU-28'. (10)
European Commission (2021). Each year the DESI is re-calculated for all countries for previous years to reflect any possible
change in the choice of indicators and corrections to the underlying data. Country scores and rankings may thus differ compared
with previous publications.
Source: Eurostat, JRC, European Commission, EEA, EAFO

32
ANNEX 6: EMPLOYMENT AND SOCIAL IMPACT OF THE GREEN TRANSITION
The green transition not only encompasses education and training to build a workforce more
improvements to environmental resilient to changes in demand for skills. The Just
sustainability, but also includes a significant Transition Fund (EUR 2.14 billion; current prices)
social dimension. While measures in this regard will help mitigate the social, employment,
include the opportunity for sustainable growth and economic and environmental impact of the
job creation, it must also be ensured that no one is transition in six Romanian counties.
left behind and all groups in society benefit from
the transition. Romania’s green transition takes The social impact of energy poverty is
place in a challenging social setting, with a carbon- partially addressed in Romania’s integrated
intensive economy in need of transformation. But, national energy and climate plan. Published in
the green economy can also provide jobs and April 2020, it provides for the creation of a new
growth opportunities, and the redistribution institution to monitor energy poverty and draw up
measures of energy taxes is likely to greatly a national strategy to fight it. The plan also
benefit low-income households. considers the impact of the green transition on
employment, in particular in the mining and coal
Graph A6.1: Fair green transition challenges regions of Hunedoara and Gorj (both within the
scope of the Just Transition Fund) (28). These two
Romania EU 2020 Romania 2015 counties employ 90% of Romania’s entire mining
GHG tonnes work force, with 18 600, jobs depending directly
per Euro of
gross added on coal extraction or coal fired energy production
value (MS/EU)
4.00 represents 18 600, with another 10 000 indirectly
3.00 depending on coal. Hunedoara and Gorj represent
Carbon GHG tonnes
inequality 2.00 per worker some 90% of greenhouse gas (GHG) emissions
(MS/EU)
1.00
(MS/EU) caused by Romania’s coal fired power plants, or
0.00 approximately 30% of all Romanian GHG
Employment emissions stemming from mining and
share in
Energy poverty
energy- manufacturing.
(MS/EU)
intensive
industries…
Moving away from fossil fuel extraction and
Share of
population in use is likely to put jobs at risk. In the counties
rural areas at
risk of poverty
of Dolj, Galați, Prahova and Mureş a significant
(MS/EU) share of the work force is employed in fossil fuel
(1) Numbers are the normalised indicator performance power and heat generation or energy-intensive
relative to the EU27 average manufacturing and heavy industry (chemicals,
Source: Eurostat, World inequality database metal processing cement, fertilisers, etc.). These
counties generate approximately 35% of
The Romania’s recovery and resilience plan Romanian’s GHG emissions stemming from mining
(RRP) sets out key elements for a fair green and manufacturing. Additional investments are
transition. Investments will be made to integrate envisaged to soften the impact of the green
energy-efficiency technologies into educational transition and coal phase-out in the region, aiming
infrastructure, including in disadvantaged areas. providing workers with new skills and work
This includes building a network of “green schools” prospects. The forthcoming territorial just
(ensuring a balance between rural and urban transition plan for Romania will include substantial
areas) and 10 integrated campuses for vocational investments in these counties.
education and training. Investments in social
infrastructure, including for people with disabilities The economy has reduced its carbon
and day centres for children at risk, will also aim footprint and though key energy-intensive
at improving energy efficiency and reducing sectors remain sizeable, the green economy
greenhouse gas emissions. has strong potential to grow and contribute
to job creation. The greenhouse gas (GHG)
Several European Funds will contribute to emissions intensity of the Romanian economy
facilitating the green transition while decreased markedly between 2015 and 2020 (in
mitigating its overall impact. The European
Social Fund Plus (ESF+) will facilitate the transition (28) European Commission’s Assesment of the final national
to a greener economy, through investments in energy and climate plan of Romania (SWD(2020)922).

33
terms of gross value added) but is still double the remains particularly vulnerable to energy poverty.
EU average. The average carbon footprint per Consumption patterns vary across the population:
worker of 10.94 tonnes of GHG emissions is the average carbon footprint of the top 10% of
decreasing and stands below the EU average emitters is about 5.8 times higher than that of the
(13.61; see Graph A6.1). Romania’s energy- bottom 50% of the population (close to the EU
intensive industries, including metals, chemicals average of 5.3 times).
and paper (29), provide jobs for 4.7% of the total
employed workforce, for which up- and reskilling Graph A6.2: Energy poverty by income decile
could be particularly important (see Annex 15). In
Romania European Union
Romania, the metal, chemical, cement, and

Unable to keep home adequately warm (per

fertiliser sectors are transforming, while 40%
coal/lignite and fossil fuel based energy production 35%
sectors are in decline (30) implying potential job
30%
losses in affected industries. The environmental

income decile)
goods and services sector provides jobs to a 25%
comparatively limited share of the employed 20%
population (1.9% vs. 2.2% in the EU) (31) and wind 15%
(especially in the South-East coastal region) and
solar energy potential as well as energy efficiency 10%

improvements offer further opportunities for green 5%

jobs (32). There is a risk that the transition will give 0%
rise to labour shortages in the greening sector of 1 2 3 4 5 6 7 8 9 10

energy production (33). Income decile

(1) HH050: Ability to keep home adequately warm

As for the social dimension of the green (2) HY020: Total disposable housing income
transition, ensuring access to essential Source: Eurostat (EU SILC survey 2020)
transport and energy services remains a
challenge in Romania. A relatively high and Tax systems are key to ensuring a fair
stable share of the rural population is at risk of transition towards climate neutrality (35).
poverty (38.9% vs. 18.7% in the EU) (34). The share Romania’s revenues from total environmental
of the population being unable to keep their taxes decreased from 2.47% in 2015 to 2.12% in
homes adequately warm decreased from 13.1% in 2019, and declined further to 1.92% in 2020
2015 to 10% in 2020, which is above the EU (2.24% in the EU). The labour tax wedge for low-
average (8.2%). Lower-income groups are affected income earners (36) declined from 37.3% to 36.6%
most and more than the EU average (see Graph between 2015 and 2019 (with a rebound to
A6.2). A large part of the Roma population lives in 37.2% in 2021), compared to 31% in the EU in
substandard settlements and housing, and 2021 (see Annex 18). Redistributive measures
accompanying environmental taxation have the
potential to foster progressive measures and to
(29) 2020 European Semester: Overview of Investment Guidance
on the Just Transition Fund 2021-2027 per Member State
have a positive impact on the disposable income
(Annex D). of households, with Romania having (among) the
strongest potential positive effects on the first
(30) European Commission’s Staff Working Document on the
territorial just transition plans (SWD(2021)275). income decile (37).
(31) There is currently no common EU-wide definition of green
jobs. The environmental goods and services sector (EGSS)
accounts only report on an economic sector that generates
environmental products, i.e. goods and services produced for (35) European Commission’s proposal for a Council
environmental protection or resource management. Recommendation on ensuring a fair transition towards
climate neutrality (COM(2021)801).
(32) Asikainen, et al., 2021
(36) Tax wedge for a single earner at 50% of the national
(33) Eurofound (2021) average wage (Tax and benefits database, European
Commission/OECD).
(34) Based on Annex 1 of the European Commission’s proposal
for a Regulation of the European Parliament and of the (37) European Commission’s Impact Assessment Report of the
Council establishing a Social Climate Fund (COM(2021) 568) proposal for a Council Directive restructuring the Union
as a proxy for potential transport challenges in the context of framework for the taxation of energy products and electricity
the green transition (e.g. due to vulnerability to fuel prices). (recast) (SWD(2021)641 PART 3/3).

34
35
PRODUCTIVITY
ANNEX 7: RESOURCE EFFICIENCY AND PRODUCTIVITY
The efficient use of resources is key to decrease over the last decade both had an impact
ensuring competitiveness and open energy on waste generation.
autonomy, while minimizing the
environmental impact. The green transition Graph A7.1: Circular economy: economic
presents a major opportunity for European importance and expansion
industry by creating markets for clean 2.0%
technologies and products. It will have an impact 1.72% 1.73% 1.75%
1.71%
across the entire value chains in sectors such as 1.8%
1.58%
energy and transport, construction and renovation, 1.6% 1.54% 1.54% 1.53%

food and electronics, helping create sustainable, 1.4%

local and well-paid jobs across Europe. 0.94% 0.94%
0.96% 0.97%
1.2%

Romania has not made progress in circular 1.0%

0.78%
secondary material usage over the past 0.8% 0.71% 0.75% 0.79%

decade. The circular (secondary) use of material 0.6%

decreased between 2015 and 2020 from 1.7% to
0.4%
1.3%, well below the EU average of 11.3% to
12.8% over the same period. Romania’s recovery 0.2%
and resilience plan (RRP) includes investments and 0.0%
reforms to support recycling and improve waste 2015 2016 2017 2018

management. It notably includes the adoption of a Persons employed in the circular economy, RO (% of total
national strategy for circular economy strategy employment)
Value added at factor cost, RO (% of GDP )
and an action plan covering the whole life cycle of
products, as well as legislation to operationalise a Source: Eurostat
unitary waste management system, the treatment
of waste, sanitation services in municipalities and
Further measures could help Romania
an extension of the packaging producer
improve its environmental technology
responsibility scheme.
performance, notably measures on sustainable
Resource productivity is far below the EU product design, resource efficient production
average. Resource productivity expresses how processes, digital solutions, industrial symbiosis,
efficiently the economy uses material resources to remanufacturing in key value chains, alternatives
produce wealth. Improving resource productivity to unsustainable extraction of raw materials, and
can help to minimise negative impacts on the new circular business models. There is also scope
environment and reduce dependency on volatile to shift reusable and recyclable waste away from
raw material markets. However, Romania’s landfills and mechanical biological treatments
resource productivity is far below the EU average (MBTs), including by making use of the available
and was actually the lowest in the EU in 2020. economic instruments to roll out, adding separate
collection facilities. This would help the country
Romania’s economic growth is not yet achieve the post-2020 recycling targets,
decoupled from the generation of waste. particularly for plastics.
Romania’s municipal waste recycling rate is
13.7%, well below the EU average of around 48%,
and far below the 2020 and 2025 EU targets of
50% and 55% respectively. The Commission had
identified Romania among the countries at risk of
missing the 2020 targets. This comparatively low
value illustrates the low level of waste
management in Romania, as do the high landfilling
rates. Romania has the highest landfilling rate in
the EU (2018 figure). However, Romania had the
lowest rate of municipal waste generation in
2020. The fluctuating GDP and the population

36
Table A7.1: Selected resource efficiency indicators
SUB-POLICY AREA 2015 2016 2017 2018 2019 2020 EU27 Latest year
EU 27
Circularity
Resource Productivity (Purchasing power
2.3 2.3 2.4 2.5 2.7 2.8 2.2 2020
standard (PPS) per kilogram)
Material Intensity (kg/EUR) 0.4 0.4 0.4 0.4 0.4 0.4 0.4 2020
Circular Material Use Rate (%) 1.7 1.7 1.7 1.5 1.3 1.3 12.8 2020
Material footprint (Tones/capita) 22.6 23.2 21.8 23.7 28.17 - 14.6 2019

Waste
Waste generation (kg/capita, total waste) - 9 012 - 10 425 - - 5 234 2018
Landfilling (% of total waste treated) - 92.3 - 93.8 - - 38.5 2018
Recycling rate (% of municipal waste) 13.2 13.4 14 11.1 11.5 13.7 47.8 2020
Hazardous waste (% of municipal waste) - 0.4 - 0.4 - - 4.3 2018

Competitiveness
Gross value added in environmental goods
and services sector (% of GDP) 1.8 1.9 1.9 2.0 2.0 - 2.3 2019
Private investment in circular economy (% of
GDP) 0.2 0.2 0.2 0.2 - - 0.1 2018
Source: Eurostat

37
ANNEX 8: DIGITAL TRANSITION
The Digital Economy and Society Index (DESI) compared with an EU average of 65%. On the
monitors EU Member States’ digital progress. indicator for pre-filled forms, Romania’s score of
The areas of human capital, digital connectivity, 19 is significantly below the EU average of 64.
the integration of digital technologies by
businesses and digital public services reflect the The large share of digital investments and reforms
Digital Decade’s four cardinal points (38). This dedicated to this dimension in the Romanian
Annex describes Romania´s DESI performance. Recovery and Resilience plan (RRP) presents an
opportunity to improve these results. The
The lack of basic digital skills and ICT measures contributing to the achievement of
specialists are key challenges for Romania. digital objectives account for 20.5% of the
The country scores considerably below EU average financial allocation, and cover all DESI dimensions
in both indicators, as only 28% of people aged with a focus on digital infrastructure and the
between 16 and 74 have at least basic digital transition to a digitalised economy and society.
skills (54% in the EU as a whole), while 41% have
at least digital content creation skills (EU average:
66%). Only 9% of individuals have above-basic
digital skills. However, the level of female ICT
specialists has improved and scores in the EU’s top
performing tier.

Digital connectivity is the dimension in which

Romania scores best. The country scores above
the EU average for very high capacity network
(VHCN) (87% compared to 70% EU average). 5G
coverage (25%) is however below the EU average
and in addition, assignment of 5G spectrum is low
(22% compared to the EU average of 56%) (39).
Fast broadband coverage increased to 93%,
surpassing the EU average. Strong infrastructure-
based competition in Romania, mainly in urban
areas, is reflected in the fixed VHCN coverage
indicator, while Romania’s urban-rural digital gap
decreased. Fixed broadband take-up has been
increasing slowly but steadily and is above the EU
average.

Romania scores very poorly on the

integration of digital technologies. The share
of SMEs with at least a basic level of digital skills
as well as the take-up of advanced technologies
like cloud, artificial intelligence and big data
remain considerably below the EU average. In
particular, only 22% of SMEs have at least a basic
level of digital intensity compared to an EU
average of 55%.Digital public services are a
key challenge for the country. Romania scores
significantly below EU average on the availability
of digital public services for citizens as well as for
businesses. Only 17% of Romanian online users
engage actively with e-government services,

(38) T2030 Digital Compass: the European Way for the Digital
Decade Communication, COM (2021) 118 final
(39) Source: Communications Committee (COCOM) based on
iDATE.

38
Table A8.1: Key Digital Economy and Society Index Indicators
EU-top
Romania EU
performance
Human capital DESI 2020 DESI 2021 DESI 2022 DESI 2022 DESI 2022
At least basic digital skills NA NA 28% 54% 79%
% individuals 2021 2021 2021
ICT specialists 2.3% 2.4% 2.6% 4.5% 8.0%
% individuals in employment aged 15-74 2019 2020 2021 2021 2021
Female ICT specialists 24% 26% 26% 19% 28%
% ICT specialists 2019 2020 2021 2021 2021
Connectivity
Fixed Very High Capacity Network (VHCN) coverage 68% 76% 87% 70% 100%
% households 2019 2020 2021 2021 2021
5G coverage * NA 12% 25% 66% 100%
% populated areas 2020 2021 2021 2021

Integration of digital technology

SMEs with at least a basic level of digital intensity NA NA 22% 55% 86%
% SMEs 2021 2021 2021
Big data 11% 5% 5% 14% 31%
% enterprises 2018 2020 2020 2020 2020
Cloud NA NA 11% 34% 69%
% enterprises 2021 2021 2021
Artificial Intelligence NA NA 1% 8% 24%
% enterprises 2021 2021 2021

Digital public services

Digital public services for citizens NA NA 44 75 100
Score (0 to 100) 2021 2021 2021
Digital public services for businesses NA NA 42 82 100
Score (0 to 100) 2021 2021 2021

* The 5G coverage indicator does not measure users’ experience, which may be affected by a variety of factors such as the type
of device used, environmental conditions, number of concurrent users and network capacity. 5G coverage refers to the percentage
of populated areas as reported by operators and national regulatory authorities.
Source: Digital Economy and Society Index.

39
ANNEX 9: INNOVATION
The present annex provides a general out a comprehensive reform package to
overview on the performance of the Romania streamline the governance of the national R&I
research and innovation system. system and to make the necessary first steps to
reform the research career.
Romania is an emerging innovation performer
according to the 2021 edition of the European Public-private cooperation remains a
Innovation Scoreboard (40), and has the weakest challenge and hampers the country’s
innovation performance in the EU. After a peak of innovation performance. Although the
0.5% of GDP in 2017 total R&D intensity percentage share of GDP available as Venture
decreased to 0.47% of GDP in 2020, remaining Capital in Romania is among the lowest in the EU,
remarkably below the target of 2% initially set for business spending on R&D has doubled since
2020. In 2018, Romania filled 70 international 2013, mostly driven by large companies. In
patent applications (a common indicator of parallel, public support for business R&D has
innovation capacity), compared to the EU average decreased over the last decade. Universities, public
of 2 046). With a score of 71, Romania ranked research institutions and businesses lack adequate
24th on the 2021 Eco-Innovation Scoreboard, incentives to seek collaborations with each other.
highlighting the need to boost its eco-innovation Romania also performs below the EU average on
activities. Romania performs well below the EU public-private scientific co-publications as a share
average on all five components of the 2021 Eco- of total publications. Although the RRP will address
Innovation Index (eco-innovation inputs, eco- some bottlenecks in science–business cooperation,
innovation activities, eco-innovation outputs, the measures focus on reforming the regulatory
resource efficiency outcomes and socio-economic framework and lack a holistic approach.
outfits).

At company level, innovation capacity is also

limited. Business expenditure on R&D in Romania
amounts to only 0.28% of GDP, compared to the
EU average of 1.53%. The number of tech start-
ups per million inhabitants is also far below the EU
average (3.5 vs. 24) (41). Similarly, the share of
high growth tech enterprises in 2019 was still very
low compared to the EU average (4.9% vs. 18.3%).

Romania has not been able to improve the

performance of its public research system or
address its chronic underfunding in the last
decade. Since 2011, public R&D intensity has
been declining from 0.32% of GDP to 0.19% of
GDP in 2020, well below the EU average. The
chronic underfunding of the public science base
has resulted in a critically low number of
researchers, with the lowest relative share in the
EU. In addition, the number of new graduates in
science and engineering halved between 2009 and
2019, and poor working conditions and career
prospects for researchers have further accelerated
human resources shortages for science and
innovation. To address these structural challenges,
Romania’s recovery and resilience plan (RRP) sets

(40) 2021 European Innovation Scoreboard, Country profile:

Romania
https://ec.europa.eu/docsroom/documents/45932/attachment
s/1/translations/en/renditions/native
(41) OECD (2022)

40
Table A9.1: Key research, development and innovation indicators

Compound EU
Romania 2010 2015 2018 2019 2020 annual growth average
2010-20
Key indicators
R&D Intensity (GERD as % of GDP) 0.46 0.49 0.5 0.48 0.47 -0.6 2.32
Public expenditure on R&D as % of GDP 0.28 0.27 0.20 0.20 0.19 -5.5 0.78
Business enterprise expenditure on R&D (BERD) as % of
0.18 0.21 0.30 0.28 0.28 4.9 1.53
GDP
Quality of the R&I system
Scientific publications of the country within the top 10%
most cited publications worldwide as % of total 3.0 3.2 4.7 : : 5.6 9.9
publications of the country
PCT patent applications per billion GDP (in PPS) 0.1 0.3 0.2 0 0 8.6  3.5
Academia-business cooperation
Public-private scientific co-publications as % of total
4.4 4.7 5.4 5.7 5.7 2.8 9.05
publications
Human capital and skills availability
New graduates in science & engineering per thousand pop.
18.4 11.2 11.2 11.9 : -4.7 16.3
aged 25-34
Public support for business enterprise expenditure on R&D (BERD)
Total public sector support for BERD as % of GDP 0.057 0.045 : 0.018 : -8.5 0.196
Green innovation
Share of environment-related patents in total patent
12,9   6,4 11  :  :  -2,0 12.8 
applications filed under PCT (%)
Finance for innovation and Economic renewal
Venture Capital (market statistics) as % of GDP 0.013 0.002 0.002 0.005 0.005 -8.3 0.054
Employment in fast-growing enterprises in 50% most
2.1 2.6 2.8 2 : 0 5.5
innovative sectors

Source: DG Research and Innovation - Common R&I Strategy and Foresight Service - Chief Economist Unit (Data: Eurostat, OECD,
DG JRC, Science-Metrix (Scopus database and EPO’s Patent Statistical database), Invest Europe)

41
ANNEX 10: INDUSTRY AND SINGLE MARKET
Productivity growth is a critical driver of the transparency, competition and the efficiency of
economic prosperity, well-being and the public procurement processes (see Annex 11).
convergence over the long run. A major source Late payments remain a concern.
of productivity for the EU economy is a well-
functioning single market, where fair and effective Certain markets for services face excessive
competition and a business friendly environment red tape. Lawyers need two licenses to operate
are ensured, in which small and medium and face stringent entry requirements.
enterprises (SMEs) can operate and innovate Accountants and tax advisors must be member of
without difficulty. Businesses and industry rely the respective chambers and are subject to
heavily on robust supply chains and are facing numerous minimum education and training
bottlenecks that bear a negative impact on firms’ requirements, on top of mandatory professional
productivity levels, employment, turnover and examinations. Architects, civil engineers and tourist
entry/exit rates. This may impact the Member guides face similar excessive regulatory
States’ capacity to deliver on Europe´s green and restrictions.
digital transformation.
Unfair competition may stem from weak
Romania’s labour productivity has been surveillance of the market including for non-
increasing, but is still below the EU average. food products. The number of inspections for
Although output per employee has been increasing such goods is very low in Romania (the third
over the past 20 years, it is still 24.8% below the lowest in the EU), due to limited resources.
EU27 average (and output per hour is 35.8% Responsibility for market surveillance of non-food
below the EU average). There is ample room to products is spread over more than a dozen
catch up. The total factor productivity decreased in authorities, posing coordination and prioritisation
2020-2021 compared with 2019, but is expected challenges. Cooperation with the customs
to pick up in 2022. authorities can help reduce the volume of non-
compliant products imported from outside the EU.
Access to finance is a constraint to doing
business (42). On SMEs’ access to finance through Romania is well integrated in the single
loans and grants, Romania scored below the EU27 market overall, but further progress is
average in 2020 (0.25 vs 0.56). It performed even needed especially on professional services.
worse on equity finance (0.06 vs 0.18). Business 22% of Romania’s labour force can be considered
angels, and private equity and venture capital to be working in regulated professions, slightly
funds are not yet widespread (43). Furthermore, the higher than the EU average of 21% (44). Several
situation for equity finance has deteriorated professions (accountants/tax advisers, tourist
significantly since 2017. To enhance liquidity for guides, architects and civil engineers) face
companies and SMEs, Romania’s recovery and significantly more restriction than the EU average.
resilience plan (RRP) includes a substantial
financial package, including equity (EUR 1.25 The overall economy was resilient to
billion). disruptions in the global supply chain, but
not all sectors were equal. Sectors such as the
Companies also face regulatory barriers and automotive industry had to reduce production due
excessive red tape. Procedures to set up a to disruptions in supplies such as semiconductors.
company, close it and report on labour market
obligations will be streamlined, simplified and
digitalised. The RRP will tackle these issues,
thereby improving the business environment and
dynamics in Romania. The RRP will also increase

(42) SMEs, start-ups, scale-ups and entrepreneurship - September

2020 - - Eurobarometer survey (europa.eu)
(43) Romania has the lowest Venture Capital investments as a
share of GDP in the EU: 0,005% in 2020 (Kraemer-Eis,
Botsari, Gvetadze, Lang, & Torfs, 2021). These investments
are mostly concentrated on ICT, business and consumer
services (Flachenecker, et al., 2020). (44) EUR-Lex - 52021SC0185 - EN - EUR-Lex (europa.eu)

42
Table A10.1: Key Single Market and Industry Indicators
SUB-
Growth EU27
POLICY INDICATOR NAME DESCRIPTION 2021 2020 2019 2018 2017
rates average*
AREA
HEADLINE INDICATORS
Value added by source VA that depends on domestic intermediate inputs,
69.21 62.6%
(domestic) % [source: OECD (TiVA), 2018]
Economic
structure

VA imported from the rest of the EU, % [source:

Value added by source (EU) 19.26 19.7%
OECD (TiVA), 2018]
Value added by source (extra- % VA imported from the rest of the world, %
11.5 17.6%
EU) [source: OECD (TiVA), 2018]
competitiveness
Cost

Producer energy price (industry) Index (2015=100) [source: Eurostat, sts_inppd_a] 145.1 107.2 113.5 104.3 95.9 51.30% 127.3

RESILIENCE
Material Shortage using survey Average (across sectors) of firms facing
Shortages/supply
dynamics dependencies chain disruptions

5 4 3 3 3 67% 26%
data constraints, % [source: ECFIN CBS]
Labour Shortage using survey Average (across sectors) of firms facing
9 8 12 10 6 50% 14%
data constraints, % [source: ECFIN CBS]
Average (across sectors), 2021 compared to 2020
Sectoral producer prices 10.6% 5.4%
and 2019, index [source:Eurostat]
Concentration in selected raw Import concentration a basket of critical raw
0.19 0.18 0.17 0.16 0.16 19% 17%
Strategic

materials materials, index [source: COMEXT]

Installed renewables electricity Share of renewable electricity to total capacity, %
57.2 56.6 50 49.8 15%
capacity [source:Eurostat, nrg_inf_epc]
Change in private capital stock, net of
Investment

Net Private investments 7.1 7.3 3.1 4.4 61.4% 2.6%

depreciation, % GDP [source: Ameco]
Change in public capital stock, net of depreciation,
Net Public investments 2.6 1.4 0.6 0.6 333% 0.4%
% GDP [source: Ameco]
SINGLE MARKET
Professional services Single Market
integration

Ratio of Intra-EU trade to Extra-EU trade, index

Intra-EU trade 3.25 2.82 2.70 2.66 2.67 22% 1.59
[source: Ameco]

Restrictiveness of access to and exercise of

restrictiveness

regulated professions (professions with above

Regulatory restrictiveness
median restrictiveness, out of the 7 professions 4       4 0.00% 3.37
indicator
analysed in SWD (2021)185 [source: SWD
(2021)185; SWD(2016)436 final])
qualifications
Professional

recognition

Professionals qualified in another EU MS applying

Recognition decisions w/o
to host MS, % over total decisions taken by host 42.4 45%
compensation
MS [source: Regulated professions database]

5 sub-indicators, sum of scores [source: Single On On On Above

cooperation EC
Compliance -

Transposition - overall
Market Scoreboard] average average average average
and MS

4 sub-indicators, sum of scores [source: Single Below On On On

Infringements - overall
Market Scoreboard] average average average average

Companies confident that their investment is

Investment
protection

Confidence in investment protected by the law and courts of MS if

58 56%
protection something goes wrong, % of all firms surveyed
[source: Flash Eurobarometer 504]
BUSINESS ENVIRONMENT - SMEs
demography

Bankruptcies Index (2015=100) [source: Eurostat, sts_rb_a] 66.8 70.6 59.8 44.7 49.40% 70.1 (2020)
Business

Business registrations Index (2015=100) [source: Eurostat, sts_rb_a] 122.4 147.7 130 141.8 -13.7% 105.6

Share of SMEs experiencing late payments in past

Late payments 52.6 52 53.1 n.a. n.a. -1.0% 45%
6 months, % [source: SAFE]

Composite: SME external financing over last 6

Access to finance

EIF Access to finance index -

months, index from 0 to 1 (the higher the better) 0.25 0.21 0.27 0.25 -1.1% 0.56 (2020)
Loan
[source: EIF SME Access to Finance Index]

Composite: VC/GDP, IPO/GDP, SMEs using equity,

EIF Access to finance index -
index from 0 to 1 (the higher the better) [source: 0.06 0.09 0.08 0.15 -56.8% 0.18 (2020)
Equity
EIF SME Access to Finance Index]

SMEs whose bank loans’ applications were refused

% of rejected or refused loans 17.7 22.3 16.5 18.6 18.4 -3.8% 12.4%
or rejected, % [source: SAFE]
Contractors which are SMEs, % of total [source:
procurement

SME contractors 63%

Single Market Scoreboard]
Public

Bids from SMEs, % of total [source: Single Market

SME bids 70.8%
Scoreboard]

Source: See the source for each indicator in the table above (column “Description”).

43
ANNEX 11: PUBLIC ADMINISTRATION
Good administrative capacity enables increase interoperability of the various public
economic prosperity, social progress, and institutions’ IT&C systems. These are expected to
fairness. Public administrations at all government reduce fragmentation, boost interoperability and
levels deliver crisis response, ensure the provision simplify bureaucratic barriers.
of public services and contribute to building
resilience for the sustainable development of the Graph A11.2: Performance on the single market
EU economy. public procurement indicator

Chart Title
Graph A11.1: E-government benchmark scores (lhs) Romania
and e-government users (rhs) 100

90 Competition & Transparency Efficiency & Quality

80 E-government benchnark E-government users
score 80
70 Single bidder Cooperative procurement
60 70
No calls for bids Award criteria
50 60
Publication rate Decision speed
40 50
30
40 SME Participation Data Quality
20
30
10 SME contractors Missing call for bids
20
0 SME bids Missing seller registration #
RO EU27 RO EU27 10
average average Procurement by lots Missing buyer registration #
User centricity To obtain information 0
Transparency To download official forms
(1) The competition and transparency indicators are triple-
Key Enablers To submit completed forms weighted, whereas the efficiency and quality indicators have
Cross-border services unitary weights. All others receive a 1/3 weighting in the SMS
composite indicator.
Source: Eurostat (ICT use survey) and E-government Source: Single market scoreboard 2020 data.
benchmark report
Evidence-based policy-making remains a
The effectiveness of Romania’s public long-standing structural challenge. Public
administration is ranked substantially below consultations and stakeholder involvement remain
the EU27 average (45). The wide range of limited as does the use of ex ante and ex post
administrative reforms is advancing slowly. impact assessments. Policy unpredictability
Frequent reorganisations and dismissals at continued in 2021 with a large share of laws
management level hinder institutional stability, the adopted in extraordinary proceedings by the
accumulation of administrative capacity, the government, and a fast-changing body of
continuity in reform implementation as well as the legislation.
consolidation and sustainability of reform
outcomes. High fragmentation of competencies The quality of public procurement in Romania
and resources continues to affect the delivery of remains a major challenge. In the Single Market
public services, especially at decentralised level Scoreboard, Romania performs below the rest of
and in lagging areas. Decision-making has often the EU. Transparency, competition and the
been based on government emergency ordinances. efficiency, of procurement processes remain
problematic (Graph A11.2).
Digital public services in Romania have been
slowly improving. The country still scores far
below the EU average (41.8 vs 70.9) (Graph
A11.1). Only 17% of internet users actively use e-
government services (EU average: 70.8%). The
Romanian recovery and resilience plan (RRP)
envisages reforms and investments for the
development of the government cloud and to

(45) Worldwide Governance Indicators, 2021

44
Table A11.1: Public administration indicators – Romania
RO Indicator (1) 2017 2018 2019 2020 2021 EU27
E-government
1 Share of individuals who used internet within the last year 13.0 12.0 15.0 16.0 17.0 70.8
to interact with public authorities (%)
2 2021 e-government benchmark´s overall score (2) na na na na 41.8 70.9
Open government and independent fiscal institutions
3 2021 open data maturity index na na na na 75.5 81.1
4 Scope Index of Fiscal Institutions 69.3 69.3 69.3 69.3 na 56.8
Educational attainment level, adult learning, gender parity and ageing
5 Share of public administration employees with tertiary 54.2 55.3 56.7 54.9 53.6 55.3
education, levels 5-8 (3)
6 Participation rate of public administration employees in na na 1.6 na 7.2 18.6
adult learning (3)
7 Gender parity in senior civil service positions (4) 3.8 0.8 7.0 8.6 7.8 21.8
8 Share of public sector workers between 55 and 74 years (3) 10.4 10.1 10.7 11.7 12.0 21.3

Public Financial Management

9 Medium term budgetary framework index 0.80 0.80 0.80 0.80 na 0.72
10 Strength of fiscal rules index 1.9 1.9 2.2 2.2 na 1.5
11 Public procurement composite indicator -5.3 -7.7 -8.3 -6.3 na -0.7
Evidence-based policy making
12 Index of regulatory policy and governance practices in the 1.39 na na na na 1.6
areas of stakeholder engagement, Regulatory Impact
Assessment (RIA) and ex post evaluation of legislation

(1) High values indicate good performance, except indicators 7 and 8.

(2) Measures the user centricity (including for cross-border services) and transparency of digital public services as well as the
existence of key enablers for the provision of those services.
(3) Break in the series in 2021.
(4) Defined as the absolute value of the difference between the share of men and women in senior civil service positions.

Source: ICT use survey, Eurostat (1); E-government benchmark report (2); Open data maturity report (3); Fiscal Governance
Database (4, 9, 10); Labour Force Survey, Eurostat (5, 6, 8), European Institute for Gender Equality (7), Single Market Scoreboard
public procurement composite indicator (11); OECD Indicators of Regulatory Policy and Governance (12).

Administrative capacity at all government 2018). The average length of administrative

levels remains a challenge. Coordination of the proceedings increased considerably (690 days in
tasks between the institutions is poor. Programme 2020 vs 138 days in 2019), and the clearance
development is impeded by weak collaboration rate decreased to 48.4% in 2020 (from 100.3% in
between central and local administration and 2019). The justice systems is losing human
heavy political interference. As a result, the resources as the number of newly recruited
objectives and policies of programmes change magistrates does not compensate for the current
often and delays occur. Programme management lack of judicial staff and the increasing number of
and strategic planning skills are limited, and the magistrates retiring (46).
participation of civil servants in adult learning is
low compared to the EU average. Romania’s 2021
RRP includes measures on merit-based
recruitment of civil servants.

The justice system is facing efficiency

challenges, and there are concerns about
judicial independence. The clearance rate for (46) For more detailed analysis of the performance of the justice
resolving civil, commercial and administrative system in Romania, see the 2022 EU Justice Scoreboard
cases at first instance decreased very slightly (forthcoming) and the country chapter for Romania of the
Commission’s 2022 Rule of Law Report (forthcoming).
(96.7% in 2020 vs 100.2% in 2019 and 103.5% in

45
FAIRNESS
ANNEX 12: EMPLOYMENT, SKILLS AND SOCIAL POLICY CHALLENGES IN LIGHT OF
THE EUROPEAN PILLAR OF SOCIAL RIGHTS
The European Pillar of Social Rights provides employment gap is among the highest in the EU,
the compass for upward convergence at 20.1 pps, and widening, with inactivity among
towards better working and living conditions women standing at 44.3% mainly due to the
in the EU. The implementation of its 20 principles limited availability of and access to early
on equal opportunities and access to the labour childhood education and care Because of the
market, fair working conditions, social protection COVID-19 pandemic, the proportion of children
and inclusion, supported by the 2030 EU headline under 3 years old in formal childcare dropped to
targets on employment, skills and poverty 6.8% in 2020 (from 14.1% in 2019) and remains
reduction, will strengthen the EU’s drive towards a significantly below the EU average of 18.5%.
digital, green and fair transition. This Annex Investment in the construction and running of 110
provides an overview of Romania´s progress in crèches outlined in the recovery and resilience plan
achieving the goals under the European Pillar of (RRP) will help address this challenge. The
Social Rights. disability employment gap stood at 30.4 pps in
2020, above the EU average of 24.5 pps. Persons
with disabilities still face reduced training
opportunities. In 2021, only 41% of the Roma
were engaged in any form of paid work. The share
of young people not in education, employment or
training (NEET) was steadily declining before the
pandemic, but remains among the highest in the
EU and increased significantly to 20.3% in 2021.

Activation measures provided by the public

employment services (PES) do not ensure
sufficient coverage and targeted support.
Investments outlined in the RRP will support the
labour market through the digitalisation of the PES
and the introduction of a system to formalise
domestic work. EU cohesion policy funds will
further support the modernisation of labour
market institutions and the transition to more
efficient and sustainable activation. Although
social partners can play an important role in
improving labour market performance, their
involvement in policy design and implementation
remains limited, as does social dialogue. The RRP
plans for the entry into force of a new social
dialogue law and a revision of the economic
sectors, while the European Social Fund Plus
(ESF+) will further strengthen social partners’
capacity.

Serious labour market challenges persist. The education and training system faces
While the employment rate increased in recent persistent quality and inclusiveness
years (67.1% in 2021, up from 60.3% in 2016), it challenges. Enrolment in early childhood
is still below the EU average of 73.1%. The education and care is well below the EU average,
unemployment rate (5.6% in 2021) is below the and the rate of early leavers from education and
EU average (7%) but is still above pre-crisis levels training is high and likely to worsen due to the
(4.9% in 2019). pandemic (see Annex 13), affecting in particular
students with disabilities or disadvantaged
The labour market participation of some backgrounds, such as Roma and people living in
population groups remains limited. The gender rural areas. Under the Recovery Assistance for

46
Cohesion and the Territories of Europe (REACT-EU), continues, as established, with the objective of
Romania financed additional classes to mitigate being finalized as soon as possible. Self-reported
the impact of COVID-19-related school closures on unmet needs for medical care remains above the
the most vulnerable pupils. However, there is still a EU average, with substantial differences between
pressing need to improve learning outcomes and income groups and regions. Access to long-term
reduce inequalities in education. care services is insufficient, especially at
community level, as is public spending on long-
Insufficient alignment of skills with labour term care. For older people, home care coverage is
market needs remains a challenge. Romania’s one of the lowest in the EU and unmet needs for
RRP aims to improve the labour market relevance long-term care are significantly higher than the EU
of vocational education and training (VET) average (61.6% in 2019 vs 46.5%). Implementing
graduates and higher education. Certain measures the minimum inclusion income, minimum wage
will receive ESF+ support, in particular those that and pension reforms, investments in child
aim to help vulnerable students gain access to all protection and the deinstitutionalisation of people
levels of education. Levels of digital skills and with disabilities, as outlined in Romania’s RRP
participation in adult learning remain critically low, could help the country achieve the 2030 EU
with less than one third of people aged 16-74 headline target on poverty reduction.
having at least basic digital skills (EU average
54% in 2021). Based on the latest available data
for 2021, participation in adult learning over the
past 4 weeks stood at 4.9% (compared to 10.8%
in the EU). Strengthening the quality and
inclusiveness of education and training will be key
if Romania is to achieve the 2030 EU headline
targets on skills and employment.

Poverty risks and inequality remain elevated.

Romania has one of the highest shares of people
at risk of poverty or social exclusion (AROPE) in the
EU (35.8% in 2020 vs an EU average of 21.6%).
The same is particularly high among people living
in rural areas, marginalised communities and
vulnerable groups, including the Roma. This is also
partly due to the high share of Roma living in
municipalities or informal settlements where
access to the labour market and public services is
severely limited. The child AROPE rate is among
the highest in the EU (41.5% vs an EU average of
23.9%) and almost 1 in 3 children experienced
severe material and social deprivation in 2020.
The share over 65 year-olds and people with
disabilities at risk of poverty or social exclusion
also remains among the highest in the EU. The
impact of social transfers (excluding pensions) on
poverty reduction is among the lowest across EU
countries, while gaps in access to social protection
remain widespread and affect in particular the
unemployed and those in non-standard forms of
employment.

Social, health, educational and employment

services are insufficiently integrated and the
deinstitutionalisation process for adults with
disabilities is lagging behind. The
deinstitutionalisation process for children

47
ANNEX 13: EDUCATION AND SKILLS
This Annex outlines the main challenges for teacher population, Romania’s ambitions to
Romania’s education and training system in improve educational outcomes rely largely on its
light of the EU-level targets of the European existing teaching force. However, neither initial nor
Education Area strategic framework and continuous teacher education is sufficiently
other contextual indicators, based on the aligned with classroom needs. Long career
analysis from the 2021 Education and progression and low salaries impact on the
attractiveness of the teaching profession. The
Training Monitor. Romania’s education and
merit-based allowance tends to encourage a
training system struggles with quality and equity
narrow focus on tests and academic competitions,
challenges that risk to worsen due to the
rather than supporting equity improvements.
pandemic. Romania lags significantly behind the
Attracting highly qualified teachers to
EU average and the EU-level targets on early
disadvantaged schools and ensuring sufficient
childhood education, basic skills, early leavers
support specialists remain challenging.
from education and training, and tertiary
education.
Participation in higher education is low,
resulting in a lack of highly skilled
Participation in early childhood education
and care is low and decreasing. Romania is professionals. Persistently high rates of early
among the EU Member States where participation school leaving, the low passing rate at the
rates in early childhood education have declined baccalaureate exam, as well as the low
compared to 2014. The enrolment rate of children participation of students from disadvantaged
between the age of 3 and the starting age of backgrounds contribute to low higher education
compulsory education is one of the lowest in the attainment. The rate is particularly low in rural
EU and significantly below the European average, areas (8.2% vs an EU average of 29.6%). The
percentage of STEM graduates (science,
in particular for Roma children (27%).
technology, engineering and mathematics) is
The majority of pupils from disadvantaged among the highest in the EU (30%), however due
to low participation in higher education, the
backgrounds lack basic skills. The share of
number of graduates ready to enter the labour
young people with low basic skills in reading,
market is low. Furthermore, the labour market
mathematics and science - as measured by the
relevance of vocational education and training and
PISA test – is almost double the EU average.
of higher education still needs improvement.
Socio-economically disadvantaged students are
Emigration has further reduced the number of
disproportionately affected. The performance gap
specialists with a higher education degree. Finally,
between them and their more advantaged peers is
participation of adults in learning remains limited
equivalent to 2.5 years of schooling. Digital skills
(see Annex 12).
among young people are also low. Learning losses
expected due to the pandemic risk to further
The reforms and investments outlined in
aggravate the situation. Public expenditure on
Romania’s recovery and resilience plan will help
education is one of the lowest in the EU (3.6% of
address some of these long-standing challenges.
GDP in 2019, EU-27: 4.7%).
Key reforms focus on improving early childhood
education and care, reducing early school leaving,
Inequalities are manifested in a large rural-
setting up a full professional route for dual
urban divide and for the Roma. Early school education and digitalising education and training.
leaving remains high, in particular in rural areas Such reforms will be backed by corresponding
(23.2%) and among the Roma, with consequences investments in infrastructure, equipment and
for their labour market and social inclusion. digitalisation, and training programmes, among
Disadvantaged pupils are often concentrated in others.
schools in which the quality of education and the
learning conditions are poor.

Evidence (47) shows that teacher policies face

major challenges. With a relatively young

(47) See Kitchen, Fordham, Henderson, Looney, & Maghnouj

(2017), Educated Romania Report (Presidential
Administration, 2021) and OECD (2020).

48
Table A13.1: EU-level targets and other contextual indicators under the European Education Area
strategic framework
2015 2021
Indicator Target Romania EU27 Romania EU27
2019 2019
Participation in early childhood education (age 3+) 96% 84.6% 91.9% 78.6% 92.8%
2018 2018
Reading < 15% 38.7% 20.4% 40.8% 22.5%
2018 2018
Low achieving 15-year-olds in: Mathematics < 15% 39.9% 22.2% 46.6% 22.9%
2018 2018
Science < 15% 38.5% 21.1% 43.9% 22.3%
Total < 9 % 19.1% 11.0% 15.3% 9.7%
Men 19.5% 12.5% 15.1% 11.4%
By gender
Women 18.5% 9.4% 15.5% 7.9%
Early leavers from
By degree of Cities 5.9% 9.6% 4.5% 8.7%
education and training
urbanisation Rural areas 27.8% 12.2% 23.2% 10.0%
(age 18-24)
Native 19.1% 10.0% 15.3% 8.5%
By country of
EU-born :u 20.7% :u 21.4%
birth
Non EU-born :u 23.4% :u 21.6%
Total 45% (2025) 25.5% 36.5% 23.3% 41.2%
Men 22.9% 31.2% 20.6% 35.7%
By gender
Women 28.3% 41.8% 26.2% 46.8%
Tertiary educational Cities 44.7% 46.2% 44.0% 51.4%
By degree of
attainment (age 25-
urbanisation Rural areas 8.6% 26.9% 8.2% 29.6%
34)
Native 25.5% 37.7% 23.2% 42.1%
By country of
EU-born : 32.7% 59.7% 40.7%
birth
u
Non EU-born : 27.0% 70.0% 34.7%
2019 2019
Share of school teachers (ISCED 1-3) who are 50 years or over 28.6% 38.3% 29.4% 38.9%

The 2018 EU average on PISA reading performance does not include ES

b = break in time series, c = confidential, u = low reliability, : = not available
Data are not yet available for the remaining EU-level targets under the European Education Area strategic framework, covering
underachievement in digital skills, exposure of vocational education and training graduates to work-based learning and
participation of adults in learning.
Source: Eurostat (UOE, LFS); OECD (PISA).

49
ANNEX 14: HEALTH AND HEALTH SYSTEMS
Especially relevant in light of the ongoing COVID- Graph A14.2: Projected increase in public
19 pandemic, resilient healthcare is a prerequisite expenditure on health care over 2019-2070 (AWG
for a sustainable economy and society. This Annex reference scenario)
provides a snapshot of the healthcare sector in
Romania.

Life expectancy in Romania is significantly Romania

2019 2070 increase
3.9 0.9
lower than in the EU as a whole (Graph A14.1),
and it fell by almost 17 months in 2020 due to
COVID-19. As of 17 April 2022, Romania reported
3.17 cumulative COVID-19 deaths per 1 000
inhabitants and 146 confirmed cumulative COVID- EU 6.6 0.9
19 cases per 1 000 inhabitants. Treatable
mortality (rate per 100,000 inhabitants) is more
than double the EU average, including deaths from 0 2 4 6 8
prostate and breast cancer. Also, mortality linked % of GDP

more closely to lifestyle is high, mainly

cardiovascular disease, lung cancer and alcohol-
related deaths.
Source: European Commission/EPC (2021)
Graph A14.1: Life expectancy at birth, years
Romania faces many challenges in health,
including access to quality care, outdated health
81.3
infrastructure and shortages of healthcare
80.9 80.9 81.0
80.5 80.4 personnel. Primary care and prevention are
underdeveloped. The numbers of physicians and
nurses per capita are well below the EU averages.
74.9 75.2 75.2 75.3 75.6 Reported unmet needs for medical care are high
74.2
compared to EU average, with substantial
differences between income groups and regions
(see Annex 12). High antibiotic consumption raises
public health concerns related to antimicrobial
2015 2016 2017 2018 2019 2020
resistance.

EU Romania Through its recovery and resilience plan

(RRP), Romania plans to invest EUR 2.85
billion (9.8 % of the total RRP) to modernise its
Source: Eurostat database health infrastructure, professionalise healthcare
management, improve human resource
Health spending in Romania increased in the management in healthcare, digitalise health
last decade but remains the second lowest in institutions and develop digital infrastructure for
the EU. About 44 % of health spending was health services, including telemedicine.
allocated to the hospital sector (including inpatient
and day care services) in 2019, amongst the
highest proportion among EU countries. Although
the public share of health spending (80% in 2019)
is in line with the EU average, direct out-of-pocket
payments (18.9% of total health spending) are
above the EU average (15.4%). Public expenditure
on health is projected to increase by 0.9
percentage points (pps) of GDP by 2070, raising
long-term fiscal sustainability concerns (Graph
A14.2).

50
Table A14.1: Key health indicators
2016 2017 2018 2019 2020 EU average (latest year)
Treatable mortality per 100 000 population
(mortality avoidable through optimal quality 208.0 206.0 210.6 208.3 92.1 (2017)
healthcare)
Cancer mortality per 100 000 population 277.3 275.6 273.2 264.0 252.5 (2017)
Current expenditure on health, % GDP 5.0 5.2 5.6 5.7 9.9 (2019)
Public share of health expenditure, % of current
78.3 78.7 79.7 80.5 79.5 (2018)
health expenditure
Spending on prevention, % of current health
1.7 1.8 1.4 1.5 2.8 (2018)
expenditure
Acute care beds per 100 000 population 516.6 525.3 528.5 533.3 387.4 (2019)
Doctors per 1 000 population * 2.8 2.9 3.0 3.2 3.8 (2018)
Nurses per 1 000 population * 6.7 7.0 7.2 7.5 8.2 (2018)
Consumption of antibacterials for systemic use in
the community, daily defined dose per 1 000 24.4 24.5 25.1 24.0 23.8 14.5 (2020)
inhabitants per day **
(1) Doctors' density data refer to practising doctors. Nurses' density data refer to practising nurses. More information:
https://ec.europa.eu/health/state-health-eu/country-health-profiles_en
Source: Eurostat database except: * Eurostat database and OECD, ** ECDC.

51
ANNEX 15: ECONOMIC AND SOCIAL PERFORMANCE AT REGIONAL LEVEL
The regional dimension is an important Graph A15.1: Real GVA per worker
factor when assessing economic and social
developments in Member States. Taking into
account this dimension enables a well-calibrated
and targeted policy response that fosters cohesion
and ensures sustainable and resilient economic
development across all regions.

Regional disparities remain very high in

Romania and are driven by labour
productivity, investment and employment
gaps between the Bucharest-Ilfov capital
region and the rest of the regions. Addressing
these gaps and prioritising investment at a
regional level would help increase the country’s
competitiveness and support long-term growth,
development and modernisation.

Romanian regions have been catching up Unit: real GVA in MM EUR (2015 prices) by employment in
thousands of persons. The light red circle shows the capital
with the rest of the EU since Romania’s
city region. The blue circles show the remaining NUTS2
accession but regional disparities persist. In regions. The green diamond shows the national average. The
the capital region, GDP per person corresponds to purple line shows the EU27 average.
160% of the EU average, followed by West region Source: European Commission
with 71%. In the other regions, GDP per person
ranges from 44% to 66% of the EU average. The The climate transition affects Romanian
capital region and four other regions grew faster regions to varying degrees (Graph A15.2).
than the EU average, while the three poorest Although Romania has one of the lowest
regions saw their GDP per person shrink between greenhouse gas (GHG) emissions per capita in the
2010 and 2019. EU, it has some of the highest rates of carbon
intensity. Emissions per GDP in 2019 were 430
In 2018, productivity in Romania was below tCO2/EUR, 13% less than in 2018 but still above
the EU average (at 69%) with great variation the EU average of 263 tCO2/EUR. Three NUTS3
across regions. Productivity ranges from 133% territories, Gorj, Dolj and Hunedoara, are
of the EU average in the capital region of dependent on coal mining and coal energy
Bucharest-Ilfov to 39% in North-East, which is production. Hunedoara and Gorj account for some
also the country’s least developed region. 90% of GHG emissions caused by Romania’s coal-
Productivity growth rates also differed fired power plants, or approximately 30% of all
significantly. Between 2010 and 2019, real Romanian GHG emissions stemming from mining
productivity grew fastest in the capital region and manufacturing. Three NUTS3 territories,
(6.36%) and the West region (6.26%). Three other Mureş, Prahova, Galați, are dependent on energy
regions saw lower productivity growth, but still intensive high emissions industries. In 2020, 30.6
above the EU average, while in three other regions % of total CO2 emissions (ETS), approx. 9.98
productivity shrunk between 2010 and 2019 million tonnes, were the result of industrial
(Graph A15.1). One factor impeding territorial activities in Galați, Prahova and Mureş. The
development is the lack of key assets, such as transition to a low-carbon economy is expected to
transport infrastructure and skilled workers, in the increase unemployment and worsen social
less developed regions. In some regions, over 20% conditions in the affected regions.
of the population aged 18-24 leave school early,
and employment in high-technology sectors and Digital disparities persist between Romanian
R&D expenditure is extremely low. regions. ICT uptake is low and Romania ranks last
in the EU in the 2021 edition of the Digital
Economy and Society Index (DESI). For instance, in
2020, only 13% of the population used the
internet to interact with public authorities
compared with an EU average of 56%. In 2020,

52
Table A15.1: Selected indicators at regional level – Romania
Productivity Real G GDP per Population Early CO2
GDP per Unemplo- R&D Innovation
NUTS 2 Region (GVA (PPS) productivity D head with high school emissions
head (PPS) yment rate expenditure performance
per person growth P growth educational leavers from fossil
A
Avg % % of
Avg % change v
change on % of active % of population population tCO2 RIS regional
EU27=100, EU27=100, on preceding g % of GDP,
preceding population, aged 30-34, aged equivalent, performance
2019 2018 year, % 2018
year, 2020 2017-2019 18-24, 2017- 2018 group
2010-2019 c
2010-2019 2019
h
European Union 100 100 1.00 1.39 7.1 39.4 10.4 2.19 7.2
România 70 69 3.05 3.12 5.0 25.6 16.6 0.50
Emerging
Nord-Vest 64 61 3.24 3.70 3.8 26.2 14.9 0.22 2.7
innovator -
Emerging
Centru 66 76 2.80 2.65 7.1 23.8 20.0 0.31 3.4
innovator -
Emerging
Nord-Est (RO) 44 39 -1.91 -1.18 3.0 17.0 20.2 0.19 2.3
innovator -
Emerging
Sud-Est 58 64 3.29 3.23 7.4 16.5 21.5 0.09 6.3
innovator -
Emerging
Sud - Muntenia 54 58 -0.47 -0.89 5.9 15.8 18.0 0.33 5.6
innovator -
Emerging
Bucureşti - Ilfov 160 133 6.36 6.72 4.7 52.4 7.3 1.15 3.8
innovator +
Emerging
Sud-Vest Oltenia 54 53 -0.17 -0.62 5.0 19.6 13.4 0.24 8.6
innovator -
Emerging
Vest 71 78 6.26 5.49 4.6 21.7 10.8 0.42 4.9
innovator -

Source: Eurostat, *EDGAR Database

the share rose to almost 30% in Bucharest-Ilfov, of the workforce concentrated in low productivity
while it remained very low in all of the less sectors experience relatively low salaries and high
developed regions, ranging from 10% in North- poverty rates, with a negative impact on social
East and South-Muntenia to 13% in South-West cohesion. The differences in productivity,
Oltenia. investment, education and poverty are only
partially reflected in the labour market figures.
Graph A15.2: Territories most affected by climate Unemployment in 2020 was low (5% overall) and
transition – Romania varied between regions (from 3.0% in North-East
to 7.4% in South-East, the only region above the
EU average). Despite the overall positive labour
market performance, the persistently low
population growth and the outward migration of
skilled labour generate significant workforce
shortages.

All regions in Romania were affected by the

COVID-19 pandemic with no clear territorial
pattern. The socio-economic consequences seem
to have been more severe in some regions, notably
the capital region. For instance, while the
unemployment rate fell sharply between 2015 and
2019, it then rose by 2.3 pps in the capital region,
by 1.8 pps in the Centre region and by around 1.0
pp in the South-East, South-Muntenia and West
regions. The share of the population at risk of
Source: European Commission. material deprivation continued to decrease in
some regions such as the capital region, South-
The share of the population at risk of Muntenia and South-West Oltenia, while it
poverty and social exclusion is the highest in increased in other regions, ranging from a 0.1 pp
the EU with major disparities between the increase in North-West region to 3.4 pps in the
Centre region.
less developed regions (with shares ranging
from 19.3% in North-West to 47.1% in North-East)
and the capital region. Regions with high shares

53
MACROECONOMIC STABILITY
ANNEX 16: KEY FINANCIAL SECTOR DEVELOPMENTS
pre-pandemic levels. The results of liquidity and
solvency stress tests show that the banking sector
This Annex provides an overview of key is able to manage the main risks that might
developments in Romania’s financial sector. materialise under a severe macroeconomic
The financial sector remains predominantly bank- scenario. Non-performing loans (NPLs) declined
based, with an overall low degree of financial steadily over the last few years and the system-
intermediation. Total banking sector assets stood wide NPL ratio stood at 3.7% in Q3-2021 (slightly
at almost 59% of GDP in 2021, of which the five above the EU average). Despite the increase in
largest banks had a share of 62.4% at the end of loan-loss provisions in 2020, profitability remained
2020, marginally lower than in 2019. The banking resilient and further improved in Q3-2021. The
sector is foreign owned to a large extent (around cost-to-income-ratio has also steadily declined on
70% of total assets), mostly by euro area banks. the back of banks’ efforts to increase efficiency.
The loan-to-deposit ratio has somewhat declined Banks in Romania are increasingly offering digital
since 2018, mainly due to the strong increase in solutions. As regards the non-banking sector, the
deposits. The market-funding ratio was rather low insurance market continues to be highly
at 27.7% in 2020, as bank loans remain the most concentrated on top insurance undertakings and
important form of external financing for most on types of insurance other than life, , notably
companies. motor vehicles segment.

The banking sector in Romania is stable The banking sector’s exposure to government
overall and it weathered the impact of the debt and to the real estate market remains
pandemic relatively well. Banking sector high. The sovereign-bank nexus remained
capitalisation has been stable for several years, significant, with local banks’ government exposure
with the capital adequacy ratio at 22% in Q3- reaching around 24% of their assets at August
2021, above the EU average and also well above 2021, one of the highest shares in the EU. This

Table A16.1:Financial soundness indicators

2015 2016 2017 2018 2019 2020 2021
Total assets of the banking sector (% of GDP) 57.6 55.6 52.6 51.0 50.0 57.1 58.8
Share (total assets) of the five largest bank (%) 57.4 59.1 59.5 61.6 62.6 62.4 -
Share (total assets) of domestic credit institutions
(%)1 9.5 8.6 22.7 25.1 26.4 29.4 30.3
1
Financial soundness indicators:
- non-performing loans (% of total loans) 13.4 9.7 6.6 5.0 4.3 3.9 3.7
- capital adequacy ratio (%) 18.9 19.2 19.4 19.7 21.0 23.5 22.0
- return on equity (%) 11.3 10.6 11.7 13.6 12.3 9.0 13.8
NFC credit growth (year-on-year % change) - - 7.9 7.7 4.1 7.5 16.6
HH credit growth (year-on-year % change) - - 10.5 9.6 5.4 5.1 7.6
1
Cost-to-income ratio (%) -57.9 -52.4 54.9 53.5 53.4 51.4 50.5
1
Loan-to-deposit ratio (%) 67.6 68.2 69.2 71.7 72.0 67.6 69.1
Central bank liquidity as % of liabilities - - - 0.0 0.0 0.1 -
Private sector debt (% of GDP) 58.1 53.8 50.9 47.5 46.7 48.4 -
1
Gross external debt (% of GDP)
1
Gross external debt (% of GDP) - public 19.6 19.1 18.0 17.1 17.8 26.6 25.0
1
Gross external debt (% of GDP) - private 26.9 28.2 27.9 26.8 27.4 27.9 26.6
Long-term interest rate spread versus Bund (basis
points) 297.8 322.9 364.1 429.0 479.2 440.3 399.8
Market funding ratio (%) 28.8 29.5 29.7 27.5 27.2 27.7 -
Green bond issuance (bn EUR) - - - - 0.4
(1) Last data: Q3 2021.
Source: ECB, Eurostat, Refinitiv.

54
results in an increase of liquid assets and a
prudent approach, but also in a non-diversified
liquidity reserves and less propensity for lending.
The latter however intensified in the course of
2021, mainly in the corporate segment, supported
by the guarantees offered by the State. Legislative
proposals such as on interest rates capping for
mortgage loans may result in tighter lending
conditions and thus in some borrowers switching
to unregulated and unsupervised solutions.

55
ANNEX 17: MACROECONOMIC IMBALANCE PROCEDURE ASSESSMENT MATRIX
The Macroeconomic Imbalance Procedure geopolitical context and the outlook of tighter
matrix presents the main elements of the in- financial conditions.
depth review for Romania (48). For Member
States selected in the 2022 Alert Mechanism Recent policy initiatives, including the
Report it presents, separately for each source of successful implementation of the RRP, could
imbalance and adjustment issue, the main findings address some vulnerabilities. Some fiscal
regarding the gravity and the evolution of the consolidation albeit limited has started in 2021.
identified challenges, as well as policy response Public sector wages have been frozen since 2021
and gaps. while future increases in the minimum wage are to
be set based on an objective mechanism by 2024,
Romania’s economy is facing vulnerabilities which should help cost competitiveness and net
related to its competitiveness and exports. The RRP includes measures that are
particularly to its external balance conducive to improving non-cost competitiveness,
developments. Increasing fiscal deficits (and such as enhancing transport infrastructure,
non-compliance with the preventive arm of the improving access and quality of education,
Stability and Growth Pact) spurring the negative improving the business environment and
current account balance, pre-dated the COVID-19 supporting innovation. Measures to foster the
crisis and have continued to increase with the efficiency of the public administration, financial
pandemic, posing risks to longer-term management and the judiciary, and to address the
sustainability via higher entitlements. Government volatile legislative framework are also part of the
debt has increased significantly, albeit from RRP (49). Additional policy action could complement
moderate levels. Currency exposures are the RRP implementation in certain areas important
significant for government and private sector for competitiveness and potential growth, such as
debts. Cost competitiveness losses accumulated labour market activation measures, local
markedly mainly over the second half of the past administrative capacity, and linkages between
decade but have eased somewhat in recent years research institutions and firms.
due to more moderate pay rises. Red tape, an
inefficient public administration and a volatile
legislative framework, further dampen
competitiveness and put a burden on investment
activity.

Going forward, vulnerabilities are not

expected to unwind soon. The current account
deficit is expected to remain elevated in the
medium term, as the government deficit is
forecast to remain sizeable, despite a reduction.
Sovereign borrowing costs have increased since
early 2021. The expected acceleration in wages
amid higher inflation and a tightening labour
market could weigh further on cost
competitiveness. Nominal depreciation alleviated
competitiveness pressures in recent years, but
further depreciation could add to inflationary
pressures and increase the burden of serving
debts in foreign currencies. The financing of the
significant external borrowing needs could become
more challenging, given the complicated

(48) European Commission (2022), COMMISSION STAFF

WORKING DOCUMENT In-Depth Review for Romania in
accordance with Article 5 of Regulation (EU) No 1176/2011 (49) https://ec.europa.eu/economy_finance/recovery-and-resilience-
on the prevention and correction of macroeconomic scoreboard/index.html#:~:text=What%20is%20it%3F,of%20the%20
imbalances, forthcoming. Covid%2D19%20pandemic.

56
Table A17.1: Assessment of Macroeconomic Imbalances matrix
Gravity of the challenge Evolution and prospects Policy response
Imbalances (unsustainable trends, vulnerabilities and associated risks)
External balance The current account deficit deteriorated Current account deficits are forecast at Before the pandemic, expansionary pro-
from a nearly balanced position in 2014 to 7.5% of GDP in 2022 and 7.3% in 2023. cyclical fiscal policies fostered a private
5% of GDP in 2020 and 7.0% in 2021. This Thus, the NIIP is set to become more consumption boom that led to a widening
was mainly due to rising imports, while negative. of the current account deficit.
export market shares continued to grow Recently, the current account deficit has Despite some consolidation efforts, the
slowly. The fundamentals of the Romanian been financed again primarily by foreign general government deficit remains at
economy suggest a close to balance direct investment, after relying on portfolio 7.1% of GDP in 2021 and is forecast to
current account. investments in 2020. decrease only marginally by 2023. Without
At –46% of GDP in 2021, the NIIP stood The government sector is a major well-specified measures, there is a risk that
below what fundamentals would suggest, contributor to the external financing needs. Romania will not comply with the EDP
but close to prudential levels. Gross Its borrowing costs have risen since early recommendation of the Council in 2022
external debt slightly increased in 2021 to 2021. Rating agencies kept Romania’s and 2023. The implementation of fiscal
58% of GDP, pushed by the government government debt at the lowest investment and pension reforms and tax collection
sector, with significant foreign currency grade. improvements included in the RRP would
exposures. help improve the public finances.

Competitiveness Over 2016-2019, unit labour costs (ULCs) ULCs are expected to accelerate, from -9% In 2021, the minimum wage increase was
growth averaged 8.3%, fuelled by very high in 2021, to 6.4% and 4.1% in 2022 and moderate, but has increased by 11% in
nominal wage increases. The pandemic led 2023 respectively, on the back of wage 2022, still well below the average of 22%
to more moderated nominal wage growth increases of 8.3% and 7%, and with between 2016-2018. The RRP foresees an
of 2.6%. In 2021, as the economy productivity growth at around 2.3%. This objective minimum wage setting
rebounded, wage growth increased strongly could lead to stronger appreciations of the mechanism as of 2024. Since 2021, public
to 5.7%. The depreciation of the leu real exchange rate, leading to potential wages have been frozen.
exchange rate has softened the cost competitiveness losses. The RRP includes measures to improve
appreciation of the unit-labour-cost-based competitiveness, such as improving
real effective exchange rate. transport infrastructure, education quality,
Non-cost factors such as deficient reducing red tape and offering business
infrastructure, particularly in poorer support. Reforms also aim to attract more
regions, skill mismatches and low talent and to increase innovation in
innovation and a cumbersome business research institutes, strengthen science-
environment, fuelled by political and industry nexus, increase the transparency
legislative uncertainty, negatively impact and effectiveness of public administration
Romania’s competitiveness. and judiciary. Gaps related to activation
measures and local administrative capacity

Source: European Commission

57
ANNEX 18: TAXATION
This Annex (50) provides an indicator-based Romania in 2021 was higher than the EU average
overview of Romania’s tax system. It includes for low income levels, and lower than the EU
information on the tax structure, i.e. the types of average for higher incomes. The increase in the
tax that Romania derives most revenue from, the proportion of workers receiving minimum wage
tax burden for workers, and the progressivity and (29% in 2021 up from 8% in 2011) has made
redistributive effect of the tax system. It also matters worse. The tax-benefit system has helped
provides information on tax collection and reduce inequalities (as measured by the GINI
compliance, and on the risks of aggressive tax coefficient) by less than the EU average.
planning.
Graph A18.1: Tax wedge indicators (2021)
Romania’s tax revenues are very low in
relation to GDP (the second lowest in EU At 50% of
Average
after Ireland, which is in a special situation), Wage (Single
and dominated by taxes on consumer goods person)
and services and labour taxes. Romania’s 37.2 RO
government revenues are less than 30% of GDP, For second
earner at 38.2 At 67% of
significantly lower than the EU average of 40%. In 67% of 38.2 Average
2021, labour tax revenues as a percentage of GDP Average Wage (Single
were among the lowest in the EU, but still Wage (Two person)
earner…
relatively high in the national tax structure
because of low property and low capital taxes.
Recurrent taxes on immovable property are low At 167% of 38.3 38.3
At 100% of
Average Average
compared to the EU average. A flat personal Wage (Single Wage (Single
income tax (PIT) rate of 10% is generally in place. person) person)
However, there are several exceptions to this rule
(e.g. the tax rate for dividends, IT and construction
sectors exemptions, the tax rate for income from
the transfer of immovable property, etc.), that (1) The second earner average tax wedge measures how
much extra personal income tax plus employee and employer
contradict the concept of a flat-rate tax system.
social security contributions (SSCs) the family will have to pay
as a result of the second earner entering employment, as a
Romania has low taxes that, in addition, are proportion of the second earner’s gross earnings plus the
not collected. Tax revenues on consumer goods employer SSCs due on the second earner’s income. For a more
and services as a percentage of GDP are in line detailed discussion see OECD (2016), ‘Taxing Wages 2016’,
OECD Publishing, Paris.
with the EU average but they are often not http://dx.doi.org/10.1787/tax_wages-2016-en
collected (Romania has the highest VAT gap in the (*) EU-27 simple average as there is no aggregated EU-27
EU since measurements began). Environmental tax value.
revenues are slightly below the EU average, and Source: Commission services
property taxes are among the lowest in the EU.
Romania also has low tax rates on inheritances
and the cadastral values, which serve as their tax
base, are not updated. Finally, corporate tax rates
were considerably below the EU average.

Romania’s labour taxes are relatively

uniform across wage levels, masking
imbalances. The labour tax wedge (51) for

(50) For more data on tax revenues as well as the methodology

applied, see EC (2021a) and the ‘Data on Taxation’ webpage
(data https://ec.europa.eu/taxation_customs/taxation-
1/economic-analysis-taxation/data-taxation_en). For more and social security contributions paid by the employer). It is
details on VAT GAP see EC (2021b). calculated for specific types of tax payers in terms of
household composition and income level expressed as % of
(51) The tax wedge is defined as the sum of personal income average wage. Data on tax wedges can be consulted in the
taxes and employee and employer social security ‘Tax and benefit database’ by ECFIN
contributions net of family allowances, expressed as a https://europa.eu/economy_finance/db_indicators/tab/
percentage of total labour costs (the sum of the gross wage

58
Table A18.1: Taxation indicators
Romania EU-27
2010 2018 2019 2020 2021 2010 2018 2019 2020 2021
Total taxes (including compulsory actual social
26.4 26.8 26.8 27.1 37.9 40.1 41.0 41.3
contributions) (% of GDP)
Labour taxes (as % of GDP) 11.0 12.2 12.0 13.0 20.0 20.7 20.7 21.5
Consumption taxes (as % of GDP) 11.3 10.1 10.2 10.0 10.8 11.1 11.1 10.8
Tax structure Capital taxes (as % of GDP) 4.1 3.7 3.9 3.3 7.1 8.2 8.1 7.9
Total property taxes (as % of GDP) 0.8 0.6 0.7 0.6 1.9 2.2 2.2 2.3
Recurrent taxes on immovable property (as % of
0.7 0.5 0.5 0.5 1.1 1.2 1.2 1.2
GDP)
Environmental taxes as % of GDP 2.1 2.0 2.1 1.9 2.4 2.4 2.4 2.2
Tax wedge at 50% of Average Wage (Single person)
42.3 36.0 36.6 37.3 37.2 33.9 32.4 32.0 31.5 31.9
(*)
Tax wedge at 100% of Average Wage (Single
44.6 38.3 38.3 38.3 38.3 41.0 40.2 40.1 39.9 39.7
person) (*)
Progressivity &
Corporate Income Tax - Effective Average Tax rates
fairness 14.4 14.4 14.4 19.8 19.5 19.3
(1) (*)
Difference in GINI coefficient before and after taxes
and cash social transfers (pensions excluded from 6.0 5.0 6.8 6.9 8.4 7.9 7.4 8.3
social transfers)
Outstanding tax arrears: Total year-end tax debt
Tax administration & (including debt considered not collectable) / total 44.4 43.0 31.9 31.8
compliance revenue (in %) (*)
VAT Gap (% of VTTL) 32.7 34.9 11.2 10.5
Dividends, Interests and Royalties (paid and
2.5 2.3 2.1 10.7 10.5
Financial Activity received) as a share of GDP (%)
Risk FDI flows through SPEs (Special Purpose Entities), %
0.0 47.8 46.2 36.7
of total FDI flows (in and out)

(1) Forward-looking effective tax rate (OECD), (*) EU-27 simple average, as no aggregated EU-27 value.
Source: European Commission and OECD

Romania is making some progress in the

digitalisation of the tax administration,
which is helping reduce tax arrears and
increase collection. Although outstanding tax
arrears have declined by 1.4 pps to 43% of total
net revenue, they remain consistently higher than
the EU-27 average. The VAT gap (an indicator of
the effectiveness of VAT enforcement and
compliance), already the highest in the EU further
deteriorated in 2019. E-filing rates (52) of tax
returns increased considerably in recent years,
together with the simplifications in VAT and the
relatively low level of administration necessary for
the flat tax; however, collection and the fiscal
predictability should improve.

Romania’s recovery and resilience plan (RRP)

outlines reforms and investments to
digitalise the tax administration. This includes
the digitalisation of the National Agency for Fiscal
Administration (ANAF), which already started.
Ongoing measures to facilitate taxpayers’
compliance and tax administration processes
include the development of digital services and
integrated risk management.

(52) EC (2021c). See section 2.1.4 Improving tax administration

for further details.

59
ANNEX 19: KEY ECONOMIC AND FINANCIAL INDICATORS

Table A19.1: Key economic and financial indicators

forecast
2004-07 2008-12 2013-18 2019 2020 2021 2022 2023
Real GDP (y-o-y) 7.6 0.6 4.5 4.2 -3.7 5.9 2.6 3.6
Potential growth (y-o-y) 6.2 2.5 3.5 4.1 3.1 3.4 3.1 3.3

Private consumption (y-o-y) 12.8 -0.1 6.1 3.9 -5.1 7.9 2.9 3.5
Public consumption (y-o-y) 1.9 1.2 1.4 7.3 1.8 0.4 0.1 -0.1
Gross fixed capital formation (y-o-y) 23.6 -3.7 1.1 12.9 4.1 2.3 4.8 8.1
Exports of goods and services (y-o-y) 13.9 7.0 10.4 5.4 -9.4 12.5 4.5 5.2
Imports of goods and services (y-o-y) 27.9 1.3 10.5 8.6 -5.2 14.6 5.0 5.3

Contribution to GDP growth:

Domestic demand (y-o-y) 15.2 -1.2 4.3 6.5 -2.0 5.5 3.0 4.3
Inventories (y-o-y) -1.4 0.0 0.4 -0.6 -0.3 1.8 0.1 -0.3
Net exports (y-o-y) -6.4 1.4 -0.3 -1.6 -1.5 -1.4 -0.5 -0.4

Contribution to potential GDP growth:

Total Labour (hours) (y-o-y) -0.8 -1.1 -0.3 -0.5 -0.8 -0.9 -0.5 -0.4
Capital accumulation (y-o-y) 2.1 2.3 1.0 1.7 1.7 1.6 1.6 1.7
Total factor productivity (y-o-y) 4.8 1.3 2.8 2.8 2.3 2.7 2.0 2.0

Output gap 5.0 -0.8 -0.5 2.0 -4.8 -2.5 -3.0 -2.7
Unemployment rate 8.9 8.5 7.4 4.9 6.1 5.6 5.5 5.3

GDP deflator (y-o-y) 13.4 6.1 3.6 6.8 3.9 5.4 9.5 4.9
Harmonised index of consumer prices (HICP, y-o-y) 8.1 5.7 1.4 3.9 2.3 4.1 8.9 5.1
Nominal compensation per employee (y-o-y) 15.8 7.9 9.2 10.9 2.6 5.7 8.3 7.0
Labour productivity (real, hours worked, y-o-y) 7.8 2.8 4.7 3.1 -2.2 14.2 1.5 2.5
Unit labour costs (ULC, whole economy, y-o-y) 7.4 5.2 4.5 6.6 4.7 -9.0 6.4 4.1
Real unit labour costs (y-o-y) -5.3 -0.8 0.9 -0.2 0.8 -13.7 -2.8 -0.8
Real effective exchange rate (ULC, y-o-y) 9.1 -3.0 3.0 1.5 . . . .
Real effective exchange rate (HICP, y-o-y) 8.5 -2.9 0.3 -0.2 1.3 0.1 . .

Net savings rate of households (net saving as percentage of net disposable

income) . . . . . . . .
Private credit flow, consolidated (% of GDP) 14.0 3.0 0.1 2.0 1.3 . . .
Private sector debt, consolidated (% of GDP) 43.7 70.7 56.5 46.7 48.4 . . .
of which household debt, consolidated (% of GDP) 12.0 21.4 17.2 15.5 16.2 . . .
of which non-financial corporate debt, consolidated (% of GDP) 31.8 49.3 39.3 31.3 32.2 . . .
Gross non-performing debt (% of total debt instruments and total loans and
advances) (2) 1.4 . 10.2 3.3 3.0 . . .

Corporations, net lending (+) or net borrowing (-) (% of GDP) -2.7 8.0 11.7 8.9 8.9 8.3 10.5 10.7
Corporations, gross operating surplus (% of GDP) 26.6 31.7 30.9 29.7 29.4 31.8 34.8 35.5
Households, net lending (+) or net borrowing (-) (% of GDP) . . . : -5.6 -8.3 -10.7 -11.7

Deflated house price index (y-o-y) . . 0.9 -1.9 2.2 . . .

Residential investment (% of GDP) 2.0 2.9 2.4 2.2 2.4 2.6 . .

Current account balance (% of GDP), balance of payments -10.3 -6.3 -1.9 -4.9 -5.0 -7.0 -7.4 -7.3
Trade balance (% of GDP), balance of payments -11.4 -7.5 -1.5 -4.1 -4.3 -5.7 . .
Terms of trade of goods and services (y-o-y) 7.5 0.9 1.0 1.1 3.3 -0.1 -0.9 -0.5
Capital account balance (% of GDP) 0.5 0.6 2.0 1.3 1.9 2.2 . .
Net international investment position (% of GDP) -37.4 -61.7 -52.6 -43.6 -47.9 -45.7 . .
NENDI - NIIP excluding non-defaultable instruments (% of GDP) (1) -5.0 -22.2 -10.6 -4.1 -7.1 -6.7 . .
IIP liabilities excluding non-defaultable instruments (% of GDP) (1) 36.1 57.8 43.7 33.6 42.0 40.6 . .
Export performance vs. advanced countries (% change over 5 years) 84.1 69.1 24.7 15.6 21.2 . . .
Export market share, goods and services (y-o-y) 13.9 2.3 6.3 1.6 2.4 2.3 -0.2 0.9
Net FDI flows (% of GDP) . -2.8 . -2.2 -1.4 -3.0 . .

General government balance (% of GDP) -1.7 -6.1 -2.0 -4.3 -9.3 -7.1 -7.5 -6.3
Structural budget balance (% of GDP) . . -1.8 -4.9 -7.8 -6.3 -6.5 -5.4
General government gross debt (% of GDP) 14.8 27.0 36.9 35.3 47.2 48.8 50.9 52.6
(1) NIIP excluding direct investment and portfolio equity shares.
(2) Domestic banking groups and stand-alone banks, EU and non-EU foreign-controlled subsidiaries and EU and non-EU foreign-
controlled branches.
Source: Eurostat and ECB as of 2 May 2022, where available; European Commission for forecast figures (Spring forecast 2022)

60
ANNEX 20: DEBT SUSTAINABILITY ANALYSIS
This annex assesses fiscal sustainability less favourable snowball effect than in the
risks for Romania over the short, medium baseline. In the ‘financial stress’ scenario, the
and long term. It follows the same multi- country temporarily faces higher market interest
dimensional approach as the 2021 Fiscal rates in 2022.
Sustainability Report, updated on the basis of the
Commission 2022 spring forecast. Graph 2 shows the outcome of the stochastic
projections. These projections show the impact
Table 1 presents the baseline debt on debt of 2 000 different shocks affecting the
projections. It shows the projected government government’s budgetary position, economic
debt and its breakdown into the primary balance, growth, interest rates and exchange rates. The
the snowball effect (the combined impact of cone covers 80% of all the simulated debt paths,
interest payments and nominal GDP growth on the therefore excluding tail events.
debt dynamics) and the stock-flow adjustment.
These projections assume that no new fiscal policy Table 2 shows the S1 and S2 fiscal
measures are taken after 2023, and include the sustainability indicators and their main
expected positive impact of investments under drivers. S1 measures the consolidation effort
Next Generation EU. needed to bring debt to 60% of GDP in 15 years.
S2 measures the consolidation effort required to
Graph 1 shows four alternative scenarios stabilise debt over an infinite horizon. The initial
around the baseline, to illustrate the impact budgetary position measures the effort required to
of changes in assumptions. The ‘historical SPB’ cover future interest payments, the ageing costs
scenario assumes that the structural primary component accounts for the need to absorb the
balance (SPB) gradually returns to its past average projected change in ageing-related public
level. In the ‘lower SPB’ scenario, the SPB is expenditure such as pensions, health care and
permanently weaker than in the baseline. The long-term care, and the debt requirement
‘adverse interest-growth rate’ scenario assumes a measures the additional adjustment needed to

Table A20.1: Debt sustainability analysis for Romania

Table 1. Baseline debt projections 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032
Gross debt ratio (% of GDP) 35.3 47.2 48.8 50.9 52.6 53.2 53.9 54.6 57.7 59.9 62.5 65.5 68.9 72.7
Change in debt 0.5 11.9 1.6 2.0 1.7 0.6 0.7 0.7 3.1 2.2 2.6 3.0 3.4 3.8
of which
Primary deficit 3.2 8.0 5.7 6.0 4.7 3.8 3.3 2.9 3.4 3.5 3.5 3.5 3.7 3.8
Snowball effect -2.4 1.4 -3.5 -3.8 -2.5 -3.2 -2.6 -2.2 -0.3 -1.3 -0.9 -0.5 -0.3 0.0
Stock-flow adjustment -0.3 2.6 -0.6 -0.1 -0.5 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Gross financing needs (% of GDP) 7.6 15.8 10.2 11.0 10.1 10.2 10.1 10.1 11.2 11.8 12.4 13.1 14.0 14.8

85 Graph 1. Deterministic debt projections (% of GDP) 85 Graph 2. Stochastic debt projections (% of GDP)

75 75 p80-p90

65 65 p60-p80

55 55 p40-p60

45 45 p20-p40
p10-p20
35 35

25 25
2019 2021 2023 2025 2027 2029 2031 2019 2020 2021 2022 2023 2024 2025 2026
Baseline Historical SPB scenario
Lower SPB scenario Financial stress scenario Median Baseline
Adverse 'r-g' scenario
Table 2. Breakdown of the S1 and S2 sustainability gap indicators
S1 S2
Overall index (pps. of GDP) 3.5 4.3
of which
Initial budgetary position 3.9 4.3
Debt requirement -0.5
Ageing costs 0.1 0.0
of which Pensions -0.2 -1.0
Health care 0.3 0.8
Long-term care 0.1 0.3
Others 0.0 -0.1
Source: European Commission

61
Table A20.2: Heat map of fiscal sustainability risks for Romania
Short term Medium term Long term
Debt sustainability analysis (DSA)
Overall Overall Deterministic scenarios Overall
S1 Stochastic S2
(S0) (S1+DSA) Overall Historical Lower Adverse Financial (S2+DSA)
Baseline projections
SPB SPB 'r-g' stress
Overall MEDIUM MEDIUM MEDIUM MEDIUM MEDIUM MEDIUM
Debt level (2032), % GDP 73 65 78 78 73
LOW HIGH HIGH MEDIUM Debt peak year 2032 2032 2032 2032 2032 MEDIUM MEDIUM
Fiscal consolidation space 75% 73% 80% 75% 100%
Probability of debt ratio exceeding in 2026 its 2021 level 65%
Difference between 90th and 10th percentiles (pps. GDP) 40
(1) Debt level in 2032: green: below 60% of GDP, yellow: between 60% and 90%, red: above 90%. (2) The debt peak year
indicates whether debt is projected to increase overall over the next decade. Green: debt peaks early; yellow: peak towards the
middle of the projection period; red: late peak. (3) Fiscal consolidation space measures the share of past fiscal positions in the
country that were more stringent than the one assumed in the baseline. Green: high value, i.e. the assumed fiscal position is
plausible by historical standards and leaves room for corrective measures if needed; yellow: intermediate; red: low. (4) Probability
of the debt ratio exceeding in 2026 its 2021 level: green: low probability, yellow: intermediate, red: high (also reflecting the initial
debt level). (5) The difference between the 90th and 10th percentiles measures uncertainty, based on the debt distribution under
2000 different shocks. Green, yellow and red cells indicate increasing uncertainty.
Source: European Commission (for further details on the Commission’s multi-dimensional approach, see the 2021 Fiscal
Sustainability Report)

reach the 60% of GDP debt target. sustainability gap indicator S1 points to high risks.
It signals that a large consolidation effort of 3.5
Finally, the heat map presents the overall pps. of GDP would be needed to bring the debt
fiscal sustainability risk classification (Table ratio to 60% of GDP in 15 years’ time (Table 2).
A20.2). The short-term risk category is based on Overall, the high risk reflects the currently large
the S0 indicator, an early-detection indicator of deficit, rising debt, and sensitivity to adverse
fiscal stress in the upcoming year. The medium- shocks.
term risk category is derived from the debt
sustainability analysis (DSA) and the S1 indicator. Long-term risks to fiscal sustainability are
The DSA assesses risks to sustainability based on medium. Over the long term, both the
several criteria: the projected debt level in 10 sustainability gap indicator S2 (at 4.3 pps. of GDP)
years’ time, the debt trajectory (‘peak year’), the and the DSA point to medium risks. The S2
plausibility of fiscal assumptions and room for indicator suggests that, to stabilise debt over the
tighter positions if needed (‘fiscal consolidation long term, it will be necessary to address the
space’), the probability of debt not stabilising in unfavourable initial budgetary position, while
the next 5 years and the size of uncertainty. The containing increasing health care costs (Table 2).
long-term risk category is based on the S2
indicator and the DSA.

Overall, short-term risks to fiscal

sustainability are low. The Commission’s early-
detection indicator (S0) does not signal short-term
fiscal risks (Table A20.2).

Medium-term risks to fiscal sustainability

are high. On the one hand, the debt sustainability
analysis (DSA) points to medium risks. It shows
that government debt, currently at 48.8% of GDP,
is projected to continue rising significantly, from
around 51% in 2022 to around 73% of GDP in
2032 in the baseline (Table 1). This debt path is
also sensitive to possible shocks to fiscal,
macroeconomic and financial variables, as
illustrated by alternative scenarios and stochastic
simulations, all pointing to medium risks (Tables
A20.1 and A20.2). On the other hand, the

62
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