World Economy

Romania No Longer Europe’s Poor Man

The economy grew 5.7% year-on-year in  the second quarter of 2017.The economy grew 5.7% year-on-year in  the second quarter of 2017.

At a sleek new office in the heart of Bucharest, Fitbit co-founder and chief executive James Park explains why the smart-wear giant is rapidly expanding its operations in Romania–and following the lead of a host of multinationals. “The tech talent here is amazing. Romania and other countries in central and eastern Europe have great existing talent, and also great universities,” he says.

The US company, which bought Romanian smartwatch brand Vector Watches for a reported $15 million late last year, and has tripled its staff in Romania since, has just opened its largest research and development center outside the US, in the Romanian capital. It’s not alone: in recent years, major global companies such as Siemens, Ford and Bosch have set up or expanded operations in Romania, boosting an economy that’s already growing at speed, Petra News Agency reported.

While many see Romania as a country of migrants flocking abroad to find work, back home the economy is booming. The services sector is expanding at pace, along with exports and manufacturing. Meanwhile, private consumption–from clothes to furniture and cars–hit a nine-year high in 2016, and increased a further 8% in the first half of this year.

The economy grew 5.7% year-on-year in the second quarter of 2017, the fastest rate in the EU, where the average growth rate was 2.4%. This was on the back of a GDP rise of 4.8% in 2016 and 3.9% in 2015; during the same period the UK economy grew by a more placid 1.8% and 2.2%. According to the International Monetary Fund, Romania’s economy is expected to grow by 5.5% for the whole of 2017.

The tech sector, in particular, is expanding fast, built on a communist-era legacy of excellence in science, mathematics and technical education, as well as Romania’s strong language skills, which have long made it a hub for IT outsourcing. While the Romanian language’s Latin roots have helped explained the country’s linguistic skills, some suggest it was a decision to subtitle rather than dub foreign programming on television that boosted foreign language exposure and proficiency.

According to industry insiders, the tech sector–which employs about 150,000 people–is expected to double its share of GDP to 12% by 2025, aided by one of the fastest broadband internet speeds in the world (behind only Singapore, Hong Kong, South Korea and Iceland).

However, wages in Romania remain far below the EU average, making it an enticing option for outsourcing; the minimum monthly wage is currently around $376–only Bulgaria’s is lower within the EU.

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