Romania is a parliamentary democracy with a market economy. Romania is a member of the EU and NATO, and enjoys broad political stability. Although governments are prone to instability, this rarely has a lasting impact on political stability or the business environment. Democratic institutions are entrenched. The executive is divided between the president (head of state) and the government. Klaus Iohannis (formally independent, formerly leader of the National Liberal Party (PNL)) is currently the President, while the Prime Minister position is hold by Florin Citu (PNL).  

The government instability risk will remain high. The center-right National Liberal Party (PNL) formed a three-party coalition after no party won an outright majority in the December 2020 elections, alongside the centrist USR-Plus Alliance and the ethnic-Hungarian Democratic Alliance of Hungarians in Romania (UDMR). The new government is likely to adopt a business-friendly stance and increase transparency. However, its weak mandate will reduce its scope of action and ability to implement its policy agenda. The fragmented political environment will drive instability throughout 2021. The civil unrest caused by the restrictive measures to control the pandemic generates violent demonstrations in Bucharest and other cities of the country, These protests, thar started at the end of March 2021, are likely to continue as long as the restrictions are maintained. Far - right party AUR is instigating the protests. 

The negative impact of the COVID-19 outbreak on Romania’s economy is expected to be high, with a case fatality rte of 2.5% at the time of writing. According to the IMF, Romania’s GDP contracted by -3,9% in 2020. The economy will be hit by the negative effect on the service sector, which has been driving growth so far, and an even weaker industrial production performance. Romania is not in a good position to weather external and internal shocks as it has one of the highest current-account and fiscal deficits in the region amid fragile investor confidence. It is expected that the budget deficit will increase from 4.5% in 2019 to around 10% in 2020–21. The IMF expects Romania's GDP to grow by 6% in 2021. 

Various measures aimed at preventing the spread of coronavirus disease  (COVID-19) are in place. Although the government replaced the state of emergency with a less restrictive state of alert on 18 May 2020, the process of easing all measures will be gradual, contributing to ongoing operational challenges. Uncertainty and the reimposition of restrictions at short notice could pose additional issues for operators in the country during 2021. Thus, businesses are likely to face disruptions during the coming months. After reaching its peak in November 2020, the country faces a downward trend in terms of covid-19 infections (IHME). The situation would be graver if the generalized use of face masks was not compulsory.

Throughout 2020, policy-making has been reactive and mainly dependent on the development and impact of the COVID-19 virus. The government will most probably focus on financial relief and economic support measures for businesses and households at the expense of budget deficits. The government and major local authorities are likely to continue to issue public debt and seek funding from international credit institutions to cover expenditures. Many policy areas like improving the public administration, judiciary services, and privatization initiatives are likely to face delays, unpredictability, and ad-hoc decisions. Opaque, slow, and inconsistent policymaking can complicate business operations and increase uncertainty for investors. High-level and petty corruption poses a serious problem for businesses and political commitment to anti-corruption efforts is inconsistent. 

Projects to improve Romania's transport infrastructure will probably be affected by budget re-prioritization and inefficient implementation. The rising budget deficit and unpredictable tax environment are adverse indicators for both public and private-sector investments. The low base and EU structural support encouraged stronger investment growth in 2019. However, a continuation of this trend is not likely, especially owing to the COVID-19 virus.

While governments are generally supportive of foreign investment and there is broad agreement on the country’s pro-EU and pro-market path, the political system is relatively volatile. Policymaking can suffer from a lack of transparency and weak institutional knowledge and experience, as well as pressure from vested interests. Frequent regulatory changes and poorly drafted legislation can complicate business operations. High-level corruption and the legacy of a chaotic and largely uncontrolled economic transition period in the early 1990s also pose threats to foreign companies. Numerous ministers, MPs and influential local politicians from across the political spectrum have been convicted of corruption since 2012-13, as the capacity and independence of anti-corruption bodies have improved. 

The government instability risk will remain high. The center-right National Liberal Party (PNL) formed a three-party coalition after no party won an outright majority in the December 2020 elections, alongside the centrist USR-Plus Alliance and the ethnic-Hungarian Democratic Alliance of Hungarians in Romania (UDMR). The new government is likely to adopt a business-friendly stance and increase transparency. However, its weak mandate will reduce its scope of action and ability to implement its policy agenda. The fragmented political environment will drive instability throughout 2021.

Romania is considered a Flawed Democracy in the 2020 Democracy Index, developed by The Economist Intelligence Unit (EIU), where the country ranks 63 out of 167 countries scored.

The country ranks 49 at the 2019 Human Development Index developed by the United Nations Development Programme.

Romania's industry is diversified and competitive, thanks to its well educated workforce, and labor costs are substantially lower than in Western Europe. Infrastructure is underdeveloped and modernization, including an expansion of the road network, is likely to be slow. Infrastructure and railway construction projects are likely to be delayed, as they were in 2019, owing to probable re-prioritization of the budget towards mitigating the coronavirus disease 2019 (COVID-19) virus impact. Romania's EU accession encouraged steps towards a simplified tax administration and an improved legal system. Nevertheless, corruption will remain a challenge. The overall risk of strikes is likely to decrease owing to the COVID-19 virus outbreak and introduced emergency measures; however, spontaneous strikes over work conditions in light of the COVID-19 pandemic are also probable.

Restrictions imposed in response to the global coronavirus disease 2019 (COVID-19) pandemic are likely to cause significant operational disruption in the coming months. Although the government has begun easing restrictions, many measures remain in place. Businesses will likely need to comply with renewed restrictions at short notice, although projections expect a decreasing trend in the number of infections. 

Operational obstacles continue to hamper the business environment, despite significant improvements over the past decade. Labyrinthine bureaucracy and high-level political corruption can impede business operations. Transport infrastructure remains underdeveloped compared with other EU states, especially outside of the major cities. Judicial independence and capacity are concerns, and the reliability of courts and enforcement of court decisions vary widely across geographical regions.

Lobbying activity is not regulated, but foreign investors should be aware that local business people engage in such practices freely via their political links. This is particularly the case at a local level, where local businesses are often able to obtain favors from local governments. Moreover, local business people may orchestrate negative media campaigns in local newspapers to deter competitors.

Outside of large cities and main highways, roads are generally in poor condition, often narrow and unlit. However, the road network is being renovated. There are two highways linking Bucharest to Pitesti or to Constanta. The roads in the Oltenia and the Moldavia regions are in poor condition. Thus, in these regions and in remote areas, extreme vigilance is advised at night due to the lack of proper street lighting. Horse-drawn carts, agricultural vehicles, cyclists, and vehicles without taillights or reflectors are common. Moreover, drivers can be very aggressive.

It is necessary for drivers to display a sticker (rovignette). This sticker is available at border posts, post offices, and at some gas stations. Vehicles are required to be fitted with snow tires during the winter.

The railway network is thorough and in good condition. However, the comfort of trains varies. Buses are a good alternative mode of transportation from town to town. They are comfortable, fast, and frequent.

To travel by taxi, travelers should only use formal taxis with a meter and with displayed prices. Taxis are usually inexpensive. Do not ride a taxi alone to go to remote areas. Travelers wanting to go to Bucharest from the airport by taxi should ask at the kiosk at the terminal exit.

Overall, Romania ranks 55 out of 190 countries scored at the 2020 Doing Business Index by the World Bank and 69 out of 198 at the 2020 Corruption Perception Index by the Transparency International Organization.

The security environment is generally stable and favorable for business activity, with few serious direct threats for foreign businesses. Petty crime poses the most significant security threat to business personnel. There is also a significant threat of white-collar crime, such as fraud, embezzlement, and – to a lesser extent – money laundering. Traditional organized criminal groups are less active than elsewhere in South-East Europe and are mostly involved in activities that would be unlikely to affect business personnel directly, such as drugs- and people-trafficking.

Internal intelligence services have a legacy of extreme efficiency from communist times. Some former members are believed to have penetrated the business environment and to occasionally resort to communist-era practices to uncover sensitive information about foreign competition in their markets. Furthermore, the intelligence services are likely to ensure that they are informed about any large businesses operating in the country, especially if these are of political relevance or may have a bearing on certain local interests. Therefore, investors are advised to thoroughly vet their security, cleaning personnel, and subcontractors.

Improved law-enforcement funding, and additional legal powers combined with greater collaboration with European counterparts, has led to a gradual decline in criminal activity. However, foreign investment has been and still is hampered by corruption in central and local governments. Organized crime in Romania is of concern, although it does not pose a risk to state stability or foreign investors. Romania is a source and transit country for human trafficking for sexual exploitation and sits on the northern drug trafficking route: Afghanistan, Pakistan/Iran, Turkey, Bulgaria, Romania, Hungary, Slovakia, and Austria/Germany. The Roma minority in Romania is particularly vulnerable to human trafficking. Local criminal groups are also involved in cybercrime, financial crime, and smuggling of refugees from war-torn countries in the Middle East into Central Europe. However, Romania, compared with neighboring Bulgaria, is not a preferred route for this form of smuggling. Violent crime in Bucharest and other large cities such as Brașov, Sibiu, and Cluj-Napoca is rare, while activities by organized criminal groups rarely affect the general public.

The risk of protests has decreased to moderate since March owing to the COVID-19 virus outbreak and the introduced restrictive measures. In general, the risk of large-scale anti-government protests attracting thousands of people in Bucharest has decreased since 2019. Romania has a record of effective political demonstrations and large, mostly peaceful demonstrations with the ability to reverse political decisions. These will probably continue to resurface in the coming years over perceived injustices, corruption scandals, or economic reasons. Peaceful protests against shale gas exploration or environmentally degrading industrial plants and other projects can be triggered near such complexes and in Bucharest.

Although relations with Russia are strained, the risk of war is low. Nevertheless, a significant improvement of Romanian-Russian relations is unlikely. This is because of the opening of a regional NATO co-ordination unit and the activation of the US missile shield system in Romania, and a growing number of NATO maritime military drills in the Black Sea and the Danube delta. Russian naval military presence in the northwestern part of the Black Sea has intensified since the annexation of Crimea, elevating the risk of disruption to commercial traffic and unintended escalation involving the Russian Navy. The risk of cyber-attacks has also increased in the past few years.

Improved law-enforcement funding, and additional legal powers combined with greater collaboration with European counterparts, has led to a gradual decline in criminal activity. However, foreign investment has been and still is hampered by corruption in central and local governments. Organized crime in Romania is of concern, although it does not pose a risk to state stability or foreign investors. Romania is a source and transit country for human trafficking for sexual exploitation and sits on the northern drug trafficking route: Afghanistan, Pakistan/Iran, Turkey, Bulgaria, Romania, Hungary, Slovakia, and Austria/Germany. The Roma minority in Romania is particularly vulnerable to human trafficking. Local criminal groups are also involved in cybercrime, financial crime, and smuggling of refugees from war-torn countries in the Middle East into Central Europe. However, Romania, compared with neighboring Bulgaria, is not a preferred route for this form of smuggling. Violent crime in Bucharest and other large cities such as Brașov, Sibiu, and Cluj-Napoca is rare, while activities by organized criminal groups rarely affect the general public.

Overall, Romania ranks 22 out of 163 within the 2020 Global Peace Index by the Institute for Economics and Peace.

Romania is not currently among the most cyber-attacked countries in the world. According to Kaspersky cyber threat map, it is ranked as the 45 most cyber-attacked countries. 

No vaccinations are required to enter the country.

Romania ranks 60 out of 195 within the 2019 Global Health Security Index, a project of the Nuclear Threat Initiative (NTI) and the Johns Hopkins Center for Health Security (JHU), developed with The Economist Intelligence Unit (EIU).

Romania contains some of the most seismically-active zones found in Europe. Small earthquakes occur yearly and large earthquakes every 30 to 50 years. In 1977, an earthquake with a magnitude of 7.4 killed 1500 people and caused significant material damage to downtown Bucharest.

Flooding is also a common occurrence. In September 2005, the country experienced its worst floods since 1970, in which 23 people were killed (Vrancea county; 14,000 people evacuated).

When traveling in the Romanian mountains, it is advised to take precautions for bear encounters. Do not approach bears by any means and give them enough space to run away. Do not make any sudden movement and do not scream. Tourists have often been hurt and killed by bears.

If you plan to visit Romania, stay informed by the Emergency Management Directorate.