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Thursday, August 9, 2007

Romania's Laboured Figures

From the Oxford Business Group (hat tip Romania International Media Watch):

Romania is in the midst of an employment crisis, or two in fact, highlighting the problems a rapidly developing economy faces as it works to expand and modernise.

Figures released by the European Union's statistics bureau Eurostat on May 2, show that the unemployment rate in Romania hit 7.8% in March, up from 6.9% for the same month in 2006. The March figure was also marginally up on the 7.7% for the first two months of the year.

If accurate, and the Eurostat figures do not come close to matching those of Romania's National Agency for Employment (ANOFM), which puts the country's jobless rate at around 4.9%, Romania saw the highest increase in unemployment levels in the EU for the month of March.

Interestingly, by using criteria established by the International Labour Organisation, the Romanian National Statistics Institute put the unemployment rate for the end of 2006 at 7.2%, far closer to the figures released by Eurostat than those of the ANOFM.

This total could be far higher but for the fact that some 2m Romanians now live overseas - almost one tenth of the population - the majority of them working in various EU member states for wages above those on offer in their homeland.

Youth unemployment is another area of concern, with the jobless rate among those between 15 and 24 years old being significantly higher than that of the general workforce, coming in at 21.5%.

These figures come despite Romania having enjoyed record high foreign investment of around $12bn, inflation falling to just under 5% and the economy expanding by 7.7% in 2006 with the National Forecast Commission (CNP) predicting it will be 6.5% this year.

One of the factors adding to the jobless queues in Romania is the prolonged drought in Central Europe, which has been hitting the country's agricultural industries and the rural communities they support. Though rural unemployment still lags behind that in Romania's big cities, it is growing.

Due to the drought, agriculture's contribution to GDP this year is tipped to fall to below 10%, according to a statement by Gheorghe Predila, the head of the National Union of Agricultural Producers of Romania on May 2.

With farmers and workers in the agriculture, forestry and fisheries sectors accounting for 25.4% of the country's workforce, a major downturn in such industries could further push up the jobless rate.

However, at the same time as Romania's unemployment rates are climbing, the country is also experiencing chronic labour shortages in many sectors, especially in its manufacturing industries. Such is the dire need for workers in some sectors like textiles and construction that employers have been forced to look overseas for staff. Recent media reports cited the case of a clothing factory in Bacau in north eastern Romania that has already hired 170 Chinese workers and plans to raise this to 500 after failing to attract local staff, despite offering double the average minimum wage.

While its economy is growing, so too is unemployment, but only in certain fields. With an exodus of skilled or semi-skilled workers to the greener pastures of Europe, Romania has been left with gaps in the workforce it cannot plug, while at the same time seeing the pool of untrained labour deepen. Added to this are the effects of the aging process, with many of the country's skilled workers in agriculture and manufacturing nearing retirement age as well as a shift away from the land and from more menial forms of employment.

It is quite possible that Romania's climbing unemployment rate, coming close to levels experienced in 2002, is more a reflection of an economy in flux than one in trouble. It will take time for the strong foreign investment of last year and the shift from a more rural based economy to one focused on services and production to train and absorb a major part of the existing labour pool.

There will also be a lapse before wages catch up with those in other parts of Europe, though this will reduce somewhat Romania's appeal as a low cost environment for investors.

With the country's population expected to fall to 21m by 2013, down from the 2006 total of 21.5m, mainly due to further emigration, it is likely that there will be job vacancies aplenty in the coming years, especially as the economy continues to grow.

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