Romanian economy was primarily agricultural. In 1948 the Communist government came to power and took control of nearly all aspects of the economy. Through a series of five-year plans, the Communists transformed Romania into an industrial nation. The economy grew considerably during the first part of the Communist period, but by the 1980s it had slid into decline, and shortages of consumer goods and degradation of the environment had become widespread. After the Communist government was overthrown in 1989, the Romanian economy virtually collapsed. Although dominated by former Communists, the new government began taking steps to reform the economy in the early 1990s. These steps included devaluing the national currency, removing government subsidies on most consumer goods, and converting some state-owned companies to private ownership.

Romania's modern economic development dates to the opening of maritime trade routes to western Europe in the early 19th century. After independence in 1878, exploitation of the cereal lands, forests, and oil fields was complemented by a policy of encouraging industry, but, in spite of considerable success, Romania still had a predominantly agrarian economy at the end of World War II. The communist regime concentrated on the expansion of industry, with priority given to the heavy industries of metallurgy, chemicals, and engineering. Industrialization was assisted by a flood of cheap labour from rural areas, where collectivization and discriminatory price-fixing meant that farmers not only lost their own holdings but secured only modest returns as farmworkers. It also benefited from close economic integration with the Soviet Union, which secured markets for manufactured goods while supplying raw materials and fuels at relatively low cost.

Romania, one of the poorest countries in Central and Eastern Europe, began the transition from communism in 1989 with a largely obsolete industrial base and a pattern of output unsuited to the country's needs. Over the past decade economic restructuring has lagged behind most other countries in the region. Consequently, living standards have continued to fall - real wages are down over 40%. Corruption too has worsened. The EU ranks Romania last among enlargement candidates, and the European Bank for Reconstruction and Development (EBRD) rates Romania's transition progress the region's worst. The country emerged in 2000 from a punishing three-year recession thanks to strong demand in EU export markets. A new government elected in November 2000 promises to promote economic reform. Bucharest hopes to receive financial and technical assistance from international financial institutions and Western governments; negotiations over a new IMF standby agreement are to begin early in 2001. If reform stalls, Romania's ability to borrow from both public and private sources could quickly dry up, leading to another financial crisis.