Romania's Rising Star: From Overlooked to Overachiever

For decades, Romania was often dismissed as one of the underperformers among other members of the post-communist bloc, overshadowed by countries like Hungary that seemed to be on a faster track to economic and political reform. However, recent years have seen Romania quietly yet assertively turning the tide, and if these emerging trends persist, Romania might soon surprise Europe and the world by becoming a formidable new player on NATO's Eastern flank. 

Romania's economic renaissance in 2022 stands as a testament to well-crafted government policies and strategic reforms. These included enhancing the business climate, attracting foreign investments, and maximizing EU funds. Achieving a GDP growth rate of 4.7% in 2022, the nation saw investments surge and the services sector bounce back post-pandemic. This economic vigor has not only stabilized the nation but set the stage for sustainable growth. 

Romania's handling of the COVID-19 pandemic also stands out, although it presents a mixed picture. While the country implemented effective measures early on, which helped control the initial spread of the virus, the overall vaccination rate has been notably low compared to other European countries. Romania's vaccination rate was among the lowest in the EU, with only around 40% of the population vaccinated by the end of 2021, far below the EU average. This low uptake has been attributed to vaccine hesitancy, distrust in public health institutions, and the spread of misinformation. Although the healthcare system managed to cope better than expected during the early stages of the pandemic, the low vaccination rate remains a significant vulnerability in Romania's public health response. 

A cornerstone of this transformation has been Romania's improved absorption of EU funds. In 2022, Romania absorbed nearly 22% of available Recovery and Resilience Facility (RRF) grants and loans, outpacing the Central and Eastern Europe (CEE) average of 16% and the EU average of 17%. Furthermore, by the end of the 2014-2020 budget period, Romania had absorbed just over 84% of the allocated EU funds, demonstrating significant progress in governance and financial management. When compared to its regional peers, Romania's recent performance in absorbing EU funds and achieving economic growth is particularly noteworthy. Historically lagging behind, Romania's advancements in 2022 now position it ahead of countries like Poland and Hungary, which have faced delays due to rule-of-law concerns. 

Political stability, often a fragile commodity in emerging economies, has been another significant asset. The coalition between the National Liberal Party (PNL) and the Social Democratic Party (PSD) under Nicolae Ciucă's leadership fostered a stable governance framework. This has been crucial in navigating economic challenges and boosting investor confidence. However, as part of an agreed rotation system, Nicolae Ciucă resigned in June 2023, making way for Marcel Ciolacu, the leader of the PSD, to become the new Prime Minister. 

Romania's strategic role within NATO, particularly in securing the Black Sea region, has been increasingly recognized as critical for European security. The Black Sea serves as a gateway for trade and energy routes and as a frontline in the geopolitical competition between NATO and Russia. Romania's commitment to regional security is evident in its strong advocacy for NATO's presence in the region and its proactive efforts to support neighboring Moldova in its European integration process. By providing financial aid and assisting Moldova in combating Russian disinformation and hybrid threats, Romania not only strengthens Moldova's position but also contributes to the broader stability of the Eastern European region, reinforcing its status as a critical player in regional security. 

A significant move was the donation of a Patriot air defense system to Ukraine, enhancing Ukraine's air defense capabilities amidst ongoing conflicts with Russia. This donation, however, came with the condition that allies, particularly the U.S., provide Romania with an equivalent system to maintain its air defenses. Moreover, Romania is set to host the largest NATO base in Europe at the Mihail Kogălniceanu Air Base near the Black Sea. This base will significantly enhance NATO's operational capabilities in the region, providing a strategic hub for air and land forces, and reinforcing the alliance's presence on its Eastern flank. This development highlights Romania's growing importance within NATO and its role as a key player in the security of the Black Sea region. 

At the local level, administrations have effectively utilized European funds to enhance public services and infrastructure. Investments in local infrastructure, energy efficiency projects, and community development have significantly improved the quality of life in various regions across Romania. This strategic use of funds was not limited to PNL-led local governments but was a common approach among local leaders across different political affiliations. 

The energy sector, a critical area for any nation's security and economic stability, has seen substantial investments. In 2023, Romania directed EUR 136 billion from non-reimbursable funds towards energy infrastructure, including renewable energy and storage projects. These investments are set to increase energy independence and modernize the sector, making Romania a leader in sustainable energy initiatives. 

The development of the IT sector and startups in Romania is another area of impressive growth. Romania has become a hub for IT outsourcing and offshoring, contributing around 6% of GDP. The country's IT talent has attracted global tech companies like Oracle, Adobe, and Amazon, which have set up local development centers. Furthermore, homegrown companies like Bitdefender and UiPath have gained international acclaim, with UiPath becoming Romania's first unicorn in 2018. The digital economy is expected to grow significantly by 2030, showcasing Romania's potential in tech innovation and entrepreneurship. 

Education and workforce development have also been key focuses. The implementation of dual education systems, spearheaded by educational reformers, aligns educational outcomes with labor market needs. This approach has improved graduate employability and supported economic growth by creating a skilled workforce ready for modern industries. Dual education integrates classroom learning with hands-on work experience, providing students with practical skills and enhancing their job readiness upon graduation. The benefits of this system include reduced youth unemployment, a better-prepared workforce, and stronger ties between educational institutions and industries. 

Despite these successes, challenges remain. Romania faces significant issues with brain drain, where a large number of educated professionals leave the country for better opportunities abroad. This has been particularly impactful in sectors like healthcare and IT, where the departure of skilled professionals stunts long-term growth potential. Moreover, many Romanians work abroad in seasonal jobs, which highlights the need for better domestic opportunities. Corruption remains a persistent issue, although Romania has made significant strides in fighting it, with high-profile cases and institutional reforms marking progress over the years. 

Looking forward, Romania's leadership envisions continued economic development through strategic investments and reforms. If these current trends persist, Romania could play a significant role in Europe and within NATO, enhancing regional security and economic stability. The country's recent achievements signal a shift from being a peripheral player to a central figure in Eastern Europe's geopolitical landscape. 

Romania's attractiveness to foreign investors is another critical element of its rising profile. Factors such as a competitive labor market, significant improvements in infrastructure, and favorable government policies have made Romania an appealing destination for foreign direct investments (FDI). The country offers a skilled workforce, competitive costs, and a strategic location that serves as a gateway to both Eastern and Western Europe. Additionally, incentives for investors and a growing market size contribute to Romania's appeal as a business hub. 

In conclusion, Romania's quiet yet decisive rise showcases its potential to become a strong player on NATO's Eastern flank. With sustained economic growth, effective use of EU funds, political stability, and a strategic role in regional security, Romania is poised to transform from an overlooked nation to a formidable force in Europe. The world should watch closely as Romania continues its journey of transformation and growth. 

Sources: 

• IMF Romania 2023 Report 
• S&P Global Report on EU Funds 
• Chatham House on Black Sea Geopolitics 
• Euractiv Article on Romania's Vaccination Struggles 
• The Guardian Coverage on Romania's COVID-19 Vaccine Hesitancy 
• EU Structural and Investment Funds Country Reports 
• Romanian Ministry of European Investments and Projects 
• Romania’s IT Industry Analysis 
• Transparency International Romania Report