This was driven by consumer confidence and domestic demand, supported by a multi-year fiscal expansion, minimum wage hikes, an accommodative monetary policy stance, and an improving EU economy that drove consumer confidence and domestic demand. Growth in employed persons and productivity continue to be constrained and unequal between regions, sectors, and genders. Forty-four percent of working age women are working (female labor force participation rate) compared to 63 percent of men, as of 2017. This translates into a gender employment gap of 19 percent, one of the largest in the EU.
Small and Medium Enterprises (SMEs), defined as enterprises employing less than 250 employees, play a significant role in employment, and account for two out of three persons employed in Romania. The 464,409 SMEs, including W-SMEs, comprise 99.7 percent of Romania’s total enterprises and account for half of the Romanian GDP (as of 2016). While SMEs are Romania’s economic engine, Romania still has the lowest ratio of SME per 1000 inhabitants in the EU. As such, there is considerable potential for entrepreneurship and the growth of that segment.
At the same time, the majority of small firms, especially those owned and led by women, are marked by low levels of labor productivity and growth. Labor productivity, defined as value-added divided by the number of persons employed, is EUR 13,150 on average for SMEs; lower than that of larger firms (EUR 23,207) and lower than the EU average. As per Enterprise Survey 2013, the average annual labor productivity growth of firms in Romania is only 0.4 percent; this is worse for firms led by women. High-growth enterprises account for only 2.3 percent of all enterprises in Romania (in 2014). As seen in Chart 1, Romania ranks second lowest in the EU with regard to share of high-growth firms in the economy, which averages at 9.2 percent across the EU-28. Moreover, during 2009-2014, five-year survival rate of new SMEs in Romania was between 40 and 60 percent.