Romania and Romania and Bulgaria Bulgaria A Brief Overview A Brief Overview Econ 270 – European Economic Integration Econ 270 – European Economic Integration Dr. Diego Méndez-Carbajo Dr. Diego Méndez-Carbajo 5/17/05 5/17/05 Presented By: Peter Brown Presented By: Peter Brown
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Romania and Bulgaria A Brief Overview Econ 270 – European Economic Integration Dr. Diego Méndez-Carbajo 5/17/05 Presented By: Peter Brown.
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Romania and BulgariaRomania and Bulgaria
A Brief OverviewA Brief Overview
Econ 270 – European Economic IntegrationEcon 270 – European Economic IntegrationDr. Diego Méndez-CarbajoDr. Diego Méndez-Carbajo
5/17/055/17/05
Presented By: Peter BrownPresented By: Peter Brown
LocationLocation
Official Names:Official Names:
• Romania (România)Romania (România) Capital: BucharestCapital: Bucharest
• Republic of BulgariaRepublic of Bulgaria Capital: SofiaCapital: Sofia
threatens to stifle economic activitythreatens to stifle economic activity• Lack of transparency in public spending and lack of Lack of transparency in public spending and lack of
competitiveness in the agricultural sector remain problemscompetitiveness in the agricultural sector remain problems
BulgariaBulgaria• Economy contracted dramatically after 1989 with the loss of Economy contracted dramatically after 1989 with the loss of
the Soviet marketthe Soviet market Living standards fell about 40%Living standards fell about 40%
• Series of unstable banking systemsSeries of unstable banking systems• Since 1997, has been on the path to recovery with GDP Since 1997, has been on the path to recovery with GDP
growing at a 4-5% rate, increasing FDI, and macroeconomic growing at a 4-5% rate, increasing FDI, and macroeconomic stability; however, still considered very poor economystability; however, still considered very poor economy
DemographicsDemographics
94.02
67.17
114.93
0
20
40
60
80
100
120
Romania Bulgaria EU Avg.
Population Density RomaniaRomania BulgariaBulgaria EU AverageEU Average
Total Total Population:Population:(2005 est.)(2005 est.)
22,329,977 22,329,977 7,450,349 7,450,349
Population Population Density:Density:(2005 est.)(2005 est.)
GDP per Capita:GDP per Capita:(2004 est.)(2004 est.)
$7,700$7,700 $8,200$8,200 $26,900$26,900
GDP Growth Rate:GDP Growth Rate:(2004 est.)(2004 est.)
8.14%8.14% 5.3%5.3% 2.4%2.4%
GDP Composition GDP Composition by Sector:by Sector:(2005)(2005)
Agriculture:Agriculture: 13.1% 13.1%
Industry:Industry: 33.7% 33.7%
Services:Services: 53.2% 53.2%
Agriculture:Agriculture: 11.5% 11.5%
Industry:Industry: 30.1% 30.1%
Services:Services: 58.4% 58.4%
Agriculture:Agriculture: 2.2% 2.2%
Industry:Industry: 28.3% 28.3%
Services:Services: 69.4% 69.4%
Pre-Accession AidPre-Accession Aid Romania and Bulgaria receive no subsidies from the EURomania and Bulgaria receive no subsidies from the EU
Instead, they receive “pre-accession aid”Instead, they receive “pre-accession aid”
Pre-accession aid is delivered by three main instruments:Pre-accession aid is delivered by three main instruments:• Phare ProgramPhare Program, providing funding for institution-, providing funding for institution-
building and investment in support of EU accession building and investment in support of EU accession preparations preparations
• ISPAISPA, the pre-accession instrument providing , the pre-accession instrument providing investments in transport and environmental investments in transport and environmental infrastructure infrastructure
• SAPARDSAPARD, the financial instrument supporting agriculture , the financial instrument supporting agriculture
and rural developmentand rural development
Common Agricultural and Fisheries PoliciesCommon Agricultural and Fisheries Policies
SAPARD allocation for 2004 is €68.0 million.SAPARD allocation for 2004 is €68.0 million.
Fiscal PolicyFiscal Policy RomaniaRomania
• Not currently a member of the EU (expected to join in 2007)Not currently a member of the EU (expected to join in 2007) No contributionsNo contributions
• Receives substantial EU support (around €700 million/year)Receives substantial EU support (around €700 million/year)• Represents around 1.4% of GDPRepresents around 1.4% of GDP
BulgariaBulgaria• Not currently a member of the EU (expected to join in 2007)Not currently a member of the EU (expected to join in 2007)
No contributionsNo contributions• Currently receives around € 400 million per year, reaching 2% of its Currently receives around € 400 million per year, reaching 2% of its
GDP GDP • EU will raise financial assistance by 30% in 2004-2006 periodEU will raise financial assistance by 30% in 2004-2006 period
32%
25%
43% ISPA
SAPARD
PHARE
Inflation and Unemployment RatesInflation and Unemployment Rates
9.60%
6.10%
2.10%
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
Romania Bulgaria EU Average
Inflation Rate
RomaniaRomania BulgariaBulgaria EU EU Avg.Avg.
Inflation Inflation
Rate:Rate:9.6%9.6% 6.1%6.1% 2.1%2.1%
Unemployment Unemployment
Rate:Rate:6.3%6.3% 12.7%12.7% 9.5%9.5%
6.30%
12.70%
9.50%
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
14.00%
Romania Bulgaria EU Average
Unemployment Rate
Social PoliciesSocial Policies RomaniaRomania
• Unemployment is down due to increasing trade Unemployment is down due to increasing trade demands within Europedemands within Europe
• Social Security devastated by communist ruleSocial Security devastated by communist rule• Immigration policy is open due to need for higher labor Immigration policy is open due to need for higher labor
inflowsinflows
BulgariaBulgaria• Unemployment is decreasing rapidly, but still Unemployment is decreasing rapidly, but still
unacceptably highunacceptably high• Social Security affected by unstable economySocial Security affected by unstable economy• Immigration policy is open due to need for higher labor Immigration policy is open due to need for higher labor
Balance:Balance: -$1.1 Billion-$1.1 Billion $51 Million$51 Million
Outstanding Public Debt Outstanding Public Debt
(as % of GDP):(as % of GDP):(2004 est.)(2004 est.)
23.6%23.6% 41.9%41.9%
Current Account Current Account Balance:Balance:
-$3.63 Billion-$3.63 Billion $682.9 Million$682.9 Million
External Relations - RomaniaExternal Relations - Romania Social:Social:
• First Central and Eastern European country to have official EU First Central and Eastern European country to have official EU relationsrelations
• Close historical, cultural, and economic ties leads to a mutually Close historical, cultural, and economic ties leads to a mutually beneficial relationship with Russiabeneficial relationship with Russia
Dependent on Russian energy suppliesDependent on Russian energy supplies Economic:Economic:
• Most important destination countries of Romanian exports Most important destination countries of Romanian exports (2002)(2002)
• Current administration has made public intentions of Current administration has made public intentions of strengthening ties with Eastern European countriesstrengthening ties with Eastern European countries
• Romanian-Hungarian relations are at an all time high Romanian-Hungarian relations are at an all time high • Great peacekeeping efforts worldwide (especially aligned with Great peacekeeping efforts worldwide (especially aligned with
the US)the US) Economic:Economic:
• Strong developing trade relations with all of EUStrong developing trade relations with all of EU