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The economy of Romania is a rapidly developing mixed economy that ranks 48th in the world by nominal gross domestic product and 41st by purchasing power parity. The Romanian economy also possesses a highly-skilled labor force which consequently places the European power very highly on the United Nations Human Development Index. In fact, the Romanian economy had the highest level of economic growth among European Union members from 2016-2017, outputting a total of some $435 million US dollars. These strong statistics are contributed by Romania’s rich level of natural resources; specifically, natural gas, copper, salt, oil, and uranium. Combined with their skilled labor force, Romania has managed to convert these resources to become a leader in production of specialized machinery, vehicles, chemical goods, pharmaceuticals, food products, plastics, rubber, and more. Furthermore, the small nation boasts a financial hub in its capital city of Bucharest, diversifying its strength even beyond most of its economic competitors and allies.
Romania has also become a major exporter of its goods and services, increasing approximately 8% over the past few years. The country does import some additional goods which have also seen a large growth in percentage recently. This is yet another metric for the country’s steady but strong economic expansion. Inside the European Union alone, Romania has become the 16th largest power by gross domestic product, making it more powerful than over half of the total countries who have joined the European union. Earning itself the nickname of ‘the Tiger’, Romania is expected to hit over $1 trillion US dollars in purchasing power parity growth over the next few decades. This article will cover the financial system of Romania, as well as a range of market information covering currency, futures, and stocks.
show moreThe Romanian stock exchange, formally known as the Bucharest Stock Exchange (BVB), or Bursa de Valori București in Romanian, is headquartered in Bucharest, the nation’s capital. The exchange lists a total of almost 90 companies with the vast majority being domestic companies with a number of international companies listed also. Romania also has an alternative trading market that lists more than triple the amount of companies as the BVB. This exchange, known as the AeRO market, is responsible for a total market capitalization of over $40 billion US dollars.
The BVB is regulated and licensed by the Financial Supervisory Authority (FSA) which monitors and regulates equities and securities markets within and around Europe. Per regulation, the Romanian exchange allows the trading of simple equities, Bonds, and the like, but also more sophisticated financial instruments such as fund units, structured products, and derivatives contracts. The Bucharest exchange also operates a market section known as RASDAQ (Romanian Association of Securities Dealers Automated Quotations), which itself is derivative of the better-known New York counterpart, NASDAQ.
Despite joining the European Union in the early 2000’s, the country has been unable to meet the financial standards for adopting the euro. The country projects that it will be able to meet said standards sometime after 2020. Despite its strong economic foundations, the country remains one of the poorest within the union.
Romania’s indigenous currency, the Romanian leu (symbolized as RON) has been pegged to various currencies including the American dollar, the Russian ruble, and the German Reichsmark throughout its history. Currently, it is free floating, as are most currencies in this day in age. The value of the Romanian leu is determined by supply and demand on the foreign exchange market. The leu is considered to be an exotic cross and is most popularly paired with the euro (EUR/RON) and the American dollar (USD/RON).
The leu, translated as lion, is the formal currency of Romania. The euro however, is also accepted in many locations throughout the country due to its positioning within the European Union. The leu is abbreviated in financial circles as RON, but is also symbolized with the letter L. The currency has undergone reevaluation recently, as have many currencies, where the “old” leu was replaced with a newer counterpart at a rate of 10,000:1. The currency mirrors the decimalization of the American dollar and can be subdivided in 100 cents called bani.
Leu banknotes are printed in 1, 5, 10, 50, 100, 200, and 500 bill denominations. The bills are printed to correspond size with the strength of denomination meaning the 500 lei (plural for leu) is significantly larger than the 5 leu bill. Each banknote depicts an important Romanian historical figure alongside meaningful flora. The leu is still recovering from the global recession of 2008.
Romania’s stock exchange, the BVB, accurately reflects the local economy as the strongest companies operate in the most powerful sectors of the economy. The strongest of these companies are listed on the most significant of the country’s indexes, known as the Bucharest Exchange Trading Index (BET). Bucharest’s strongest index consists of 10 of the most liquid companies listed on the exchange. The BET is considered to represent some of the best entities, that is to say investment opportunities, within the Romanian market. However, the country’s instability as a whole means that financial opportunities should be taken with proper risk management, and possibly, with a grain of salt.
