THE LEGATUM PROSPERITY INDEX™ 2016

Bringing Prosperity to Life

Romania

Ranked 50th of 149

At a glance

Ranks

50 th on the Legatum
Prosperity Index™

65th
41st
64th
47th
85th
46th
48th
97th
61st

SUB-INDEX RANKINGS

In the Prosperity Sub-Index rankings, Romania performs best on Business Environment and Safety & Security and scores lowest on the Social Capital sub-index.

Visit our Rankings table to see how Romania compares to other countries.

Prosperity Gap

The ‘Prosperity Gap’ takes a country's GDP and uses it as the yardstick to measure a nation's expected Prosperity Index ranking.

Since 2007, Romania has continued to reduce the size of its prosperity deficit and is edging closer to closing its prosperity gap. Thanks to a stronger business environment and anti-corruption crackdown, the Prosperity Index sees Romania now having a smaller gap than Hungary, who joined the EU three years earlier.

Note:
In the chart above, each dot represents a country. The curve shows the general tendency with which prosperity increases as GDP per capita increases. If a country falls below the curve, then we can say that compared to all other countries, it is under-delivering prosperity for its citizens. Likewise, if a country rises above the curve, then we can say that it is over-delivering prosperity for its citizens. Learn more about the Prosperity Gap here.

Alternatively, have a look at the Prosperity Gap view on our Rankings table for a full list of countries and to see how each of them are performing on the various sub-indices.

Commentary

The Prosperity Index indicates that Romania is moving slowly, yet steadily on the path to increased prosperity and better governance, but that major hurdles still remain.

Romania is often referred to as the “Tiger of Eastern Europe” because of its rapid economic growth and development since it joined the EU in 2007. In the second quarter of 2016, there was an 6% growth in GDP and Romania is on track for a 5% economic growth for the year, making it one of the fastest growing economies in the region. Increased foreign investment, low tax, and rising wages have resulted in a boom of new business which is reflected in the Business Environment sub-index. The Prosperity Index records 68% - a 15% increase since 2007 - of people feeling their area is a good place to open a business, comparable to 71% in Germany. In this aspect, Romania outperforms all of its Eastern European peers and ranks 5th among EU member states.

Percentage (%) of people thinking it’s a good place to start a business in Romania, the OECD, EU, and Bulgaria since 2007.
Romania performs well above the EU & OECD nations when it comes to citizens feeling optimistic about business opportunities in their country. It also far outperforms its neighbour, Bulgaria, with which it is frequently compared given that they both joined the EU in 2007.

Interestingly, there has been little movement in the Economic Quality sub-index over the same time period which raises the question as to whether Romanians compare their economic wellbeing to their Western peers rather than rating it on an absolute scale. Perception could well be a factor here, especially given the political and economic context. Romania not only began its recovery from Communism later than its Eastern European peers (thanks to a post-1989 interim regime that was Communist in all but name) but also started from a lower base (because of Ceaucescu’s particularly ruinous economic approach.) Despite the overall improvement to living standards, Romanians still perceive they are far behind their European peers.

Positive developments can be found in the Personal Freedom, Social Capital, and Natural Environment sub-indices, where Romania has seen the biggest changes over the past decade. Romania has moved up 12 ranks in the Personal Freedom sub-index and has undergone a slow, but notable trend, of becoming an increasingly tolerant and more liberal society. While its neighbours, Hungary and Bulgaria, have seen tolerance for immigrants and people of ethnic minorities decline since 2007, Romania has, in fact, seen the opposite: more people think their area is a good place for immigrants and people of ethnic minorities to live. It has also so far avoided the upturn in right-wing populist movements seen elsewhere in Europe. By contrast, there has been almost no change in acceptance of the LGBT community over the past decade, which reflects the continually strong influence of the Orthodox church on Romanian society.

One of the biggest improvements can be seen in the Social Capital sub-index in which Romania has moved up 31 ranks to 97th. Since 2007, there has been a 24% increase in people responding that they have recently helped a stranger and a 16% increase in people feeling they have the opportunity to meet new people. Voter turnout, however, remains an issue and was just 40% in 2016. A large part of the population still lives in the rural countryside and it is crucial that Romania continues to improve its infrastructure and access to education in order to increase its democratic participation. More worryingly, as recently as the 2014 presidential election, there were attempts by the ruling political elite to hinder the large opposition-leaning Romanian diaspora from voting in the first round. These attempts backfired when huge protests in support of the diaspora broke out in major Romanian cities and abroad, leading to a sweeping victory of the anti-corruption opposition party in the second round of voting.

It is clear that issues of governance and corruption remain a major concern and have an effect on Romania’s prosperity. However, the Prosperity Index reports a small improvement in the Governance sub-index since 2007 and there are grounds for optimism. Romania has taken steps to protect the independence of its judiciary and has begun a serious crackdown on corruption, jailing more corrupt politicians than its Eastern European peers combined. This progress is reflected in the Government sub-index which reports greater efficiency in the legal system, increased government transparency, more judicial independence, and a lower perception of corruption over the past decade. Bulgaria and Hungary, meanwhile, have performed steadily worse in Governance over the same period and, notably, there is a higher perception of corruption in both countries since 2007.

Governance Score (quality of Governance) in Romania, Bulgaria and Hungary since 2007.
Romania’s Governance score improves after serious efforts to combat corruption, while its Eastern European peers, Hungary and Bulgaria, see their score decline over the same period.

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Data

How to read this graph:
When comparing multiple countries on a spider chart, data points that appear
further away from the center represent a better performance to the points that are closer to the center.