Relatively low wages and an educated workforce make Romania an attractive destination for foreign direct investment. The country’s EU membership has deepened trade and capital market integration, fostering continued convergence with other members of the bloc. A flexible currency and limited private sector indebtedness provides some space for Romania’s policymakers to stimulate growth.
We keep our clients informed of the latest market moves and political developments as part of our 'top-down' and 'bottom-up' perspective in Romania. Clients also benefit from in-depth analysis on 22 of the country’s most important industries. We provide interactive data and forecasting alongside detailed and risk-assessed analysis from our expert teams. We aim to keep you ahead of the curve, so you can do business with ease in Romania.
Romania Country Risk
Impressive headline growth figures in Q216 support our view that Romania is set to be a regional outperformer over the next two years.
Growth in Romania will be driven by robust private consumption and fiscal stimulus in the run-up to the November 2016 general election.
Fixed investment will only marginally contribute to growth over the coming years, as EU structural funds decline.
Romania's current account deficit will widen over the next two years as rising wages boost imports while eroding export competitiveness. External financing will be met through stable investment inflows and sovereign debt issuance as the government looks to capitalise on record low yields.
Romania's budget deficit is set to rise over the next two years due to tax cuts...
Romania Operational Risk Coverage (9)
Romania Operational Risk
Romania Operational Risk
BMI View: While the migrant crisis is affecting operational risk across many Emerging European states, Romania is less exposed to this risk than its neighbours, as it does not form the main part of the main migrant route from North Africa and the Middle East to mainland Europe. Financial crime, cybercrime and endemic corruption in the political and judicial system instead are the main concern for investors and continue to undermine the operating environment and dampen investor confidence in Romania. The lack of skilled labour is another cause for concern, particularly in light of declining secondary and tertiary education enrolment and attainment rates, and Romania's ongoing 'brain drain' is resulting in the loss of the most qualified candidates to competing markets. Somewhat offsetting these risks are the high level of openness to foreign investment,...
Romania Crime & Security
Romania Crime & Security
BMI View: From a crime and security perspective, Romania performs competitively in comparison to many of its Emerging European peers. Business crime threats such as cybercrime, financial crime and organised criminal activities pose the largest risk to investors seeking to break in to Romania and businesses already operating in the country. Corruption endemic in the Romanian government, law enforcement and industry also hampers efforts being made to crackdown on these types of crimes. Security concerns related to petty or violent crime and international conflicts or terrorist attacks, however are minimal. Therefore, Romania scores a relatively...
Romania Labour Market
Romania Labour Market
BMI View: Issues such as low levels of tertiary education, high unionisation rates, and high levels of skilled labour emigration, detract from Romania's otherwise attractive labour market. Low wages, flexible employment legislation and a large working-age population will continue to keep costs low within the manufacturing sector, which is one of the country's key industries. Therefore, Romania scores 55.9 out of 100, ranking the country in 17th place out of 31 Emerging European states and in 63rd position globally.
|Attractive Labour Market For Manufacturing Industries|
|Romania and Regional Average Labour Market Risk|
BMI View: Companies operating in Romania face significant internal logistics risks stemming from electricity blackouts, water shortages and poor road quality. The operations of crucial industries such as manufacturing, mining and agriculture which are either power or water intensive and heavily reliant on the road network for freight transport, are underscored as being particularly at risk. The government has announced significant investments and projects for rectifying the infrastructure deficit in Romania, but these will only see a moderate decrease in the logistic risk for companies in the medium to long term. Romania's EU membership minimally mitigates these risks, by enabling the ease of trade through efficient and inexpensive customs procedures. Consequently, Romania scores a moderate 63.1 out of 100, ranking 9th out of 31 emerging Europe states.
|Low Bureaucratic Hurdles To...|
Romania Trade & Investment
Romania Trade & Investment
BMI View: Romania's potential as a trade and investment destination is looking strong given its robust economic performance, tariff-free trade access to EU markets, strong FDI inflows, as well as low taxation rates and efficient taxation system. However, its overall score is hindered by examples of displays of policy discontinuity by the Romanian government in relation to foreign investors, as well as the problem of corruption, which is still embedded in the Romanian government and legal system. Consequently, Romania is awarded a score of 62.7 out of 100 for the overall BMI Trade and Investment Risk Index , ranking the country eleventh out of 31 states in the Emerging European region.
|Overall Trade And Investment Score Above Regional Average|
Romania Industry Coverage (21)
BMI View: We still believe the Romanian grain sector has high growth potential owing to its competitiveness and its exposure to the Middle East and Asia. We believe that the country's poultry sub-sector will outperform the rest of the livestock sector, owing to strong demand from Romania's population. Milk production will see limited growth after the EU quota removal (March 2015), while the sugar sector will moderately benefit from the removal (2017).
|Agribusiness Market Value|
|BMI Market Value By Commodity (2011-2019)|
|e/f = BMI estimate/...|
BMI View: We forecast a 14.9% increase in vehicle sales in 2015 on the back of a recovery in the passenger car and commercial vehicle (CV) segments.
|Passenger Car and Light Commercial Vehicle Sales|
|f = BMI forecast. Source: APIA, BMI|
Romania Commercial Banking
|Date||Total assets||Client loans||Bond portfolio||Other||Liabilities and capital||Capital||Client deposits...|
Defence & Security
Romania Defence & Security
BMI View: We expect Romania's defence budget to increase, both in absolute terms and as a share of GDP, in the next five years. This growth will be driven by the rising tensions in the Black Sea region, as Russia's increasingly aggressive stance in Ukraine and Moldova is prompting Romania to speed up the process of modernisation of its armed forces. Modernisation will initially focus on ...
Food & Drink
Romania Food & Drink
BMI View: Romania's food and drink industry is poised for good growth, on the back of rising disposable incomes that will be aided by successive tax cuts, rising average wages and favourable labour market conditions. Consumers will increasingly trade up price points over our forecast period, which will drive value growth in the mass grocery retail sector. Premium categories will see good growth as discretionary spending rises.
|Food and Drink Spending|
Romania Freight Transport
BMI View: In light of an improving economy in Romania and the eurozone recovery, trade activity will grow and private consumer demand will increase, providing opportunities for the freight sector in general. As exports increase in agricultural and heavy machinery, rail freight will see moderate growth in 2016, while road freight will have the strongest growth due to improved domestic conditions and investment in infrastructure.
The economic situation in Romania looks promising for our forecast period, benefiting from a recovery in Europe, increased employment and consumer purchasing power. Romania is set to be one of the fastest growing economies in south-eastern Europe, as it transitions towards a more balanced growth model driven by both private consumption and exports. Road freight will benefit from private consumption, while rail will benefit from exports.
Romania Freight Transport
BMI View: Strong growth in imports in particular will boost Romania's freight transport network in 2016 and beyond. A rapid expansion in wages will boost household spending power lending particular support to air and road freight volumes. Real GDP growth will be second only to Ireland in the EU.
The Romanian road haulage sector will enjoy healthy volume growth in 2016 which will speed up further over the remainder of our forecast period to 2020. Although already fairly well developed, growth will be driven by strong domestic demand for imported consumer goods, following a rapid rise in disposable incomes. Over the longer term, EU-funded investment in new roads will support both domestic volumes and the country's attractiveness as a transit hub.
Despite significant challenges from aging infrastructure which has forced rail freight operators' trains to run extremely slowly,...
Romania Information Technology
BMI View: Romania is one of the lower income markets in Central and Eastern Europe, with device and solution penetration rates below much of the rest of the region. This growth potential is expected to be unlocked over the medium term as the economic environment becomes more supportive after a drag in 2014-2015. Our household income forecast shows an expanding and increasingly affluent middle class, which is positive for device spending, as well as wider economic sentiment. Meanwhile, the enterprise application market has considerable potential in ERP and CRM, and lower-cost cloud providers could make gains in market share by tapping this underpenetrated opportunity. For the Romanian IT market as a whole we forecast a CAGR of 7.2% over 2016-2020 to almost RON7.7bn....
BMI View : Although construction growth will slow in 2016 on the back of a weaker than expected first quarter, Romania's construction sector growth will nevertheless outpace the European average over the next five years as EU funding inflows seek to alleviate the country's significant infrastructure deficit. An improving macro-economic climate and expansionary fiscal policy will buoy residential construction, a sector we expect to outperform in 2016 and over the first half of our ten-year forecast. Romania's growth potential is clouded by significant risks, however, as the country's construction sector remains plagued by...
BMI View: We retain our broadly positive outlook for the Romanian insurance market in 2016 and beyond, out to the end of our forecast period in 2020. The life sector is in its early stages of development with low rates of density and penetration, having largely been constrained by disposable income levels in the country. Rising incomes will bolster life insurance uptake in the country and make it more affordable. The non-life sector is more established, though largely dominated by basic motor and property lines. We identify the primary drivers of growth as rising average household incomes, growing private final consumption levels, higher disposable incomes and positive macroeconomic market fundamentals. We believe that this growth could attract more foreign investment to the small Romanian market, though some regulatory uncertainty could deter potential investors....
Romania Medical Devices
BMI Industry View: We project the Romanian medical device market to grow by a CAGR of 2.3% over the 2014-2019 period, supported by good economic growth and rising health expenditure. The scarcity of high-tech equipment, expanding private healthcare sector and acute need for renovation within hospitals keeps the demand for medical devices high. The market is expected to remain heavily reliant on imports as the domestic industry mainly produces outdated equipment that can only compete with foreign products in terms of price.
Headline Industry Forecasts
In local currency terms, we expect the medical device market to grow by a projected 2014-2019 CAGR of 5.1%, which is slightly higher than the GDP forecast for the country, but market growth will be weaker in US dollar terms due to the projected depreciation of the Romanian leu against the...
BMI View: Romania's potential as an important centre for European mining remains undermined by a number of ongoing challenges. While efforts are being made on a governmental level to improve the business environment by reducing corruption and providing a steady economic platform from which to support private sector activity. However, this has only partly filtered through to the mining sector, where foreign operators continue to meet with a number of challenges. As well as a lingering infrastructure deficit, the government's opposition to Gabriel Resources' Rosia Montana mining project highlights the opposition towards commercial mining ventures that still exists in the country and that has prevented the country from fully leveraging its significant resources. Pressure on the government...
Oil & Gas
Romania Oil & Gas
BMI View: Investment into E&P is waning as major offshore drilling programmes have concluded, though field redevelopment projects continue over the short term. Refinery output demand and fuels demand have both improved on the back of lower oil prices.
Romania's petrochemicals industry is witnessing a strong performance in a market that is witnessing stronger growth. Increased household disposable income and the country's strategic position in the automotive sector are supporting petrochemicals consumption. As a result, there will be plenty of upside for the Romanian petrochemicals industry. Growth could be boosted further if Oltchim resumes full production following privatisation, although BMI is mindful that some loss-making units could be permanently closed.
Weaker oil prices have helped Romania's downstream sectors, with refining margins improving as a result, and thereby reversing the situation of regular quarterly losses. This is helping drive down the cost of naphtha feedstock used in the Romanian petrochemicals industry, reviving the fortunes of the sector.
Romania's rubber and...
Pharmaceuticals & Healthcare
Romania Pharmaceuticals & Healthcare
BMI View: In line with Romania's economic outperformance in Europe, the country's pharmaceutical and healthcare markets will see strong growth given increased consumer spending power and higher healthcare contributions. However, aggressive drug pricing regulations, including the imminent joint drug procurement agreement with CEE countries, will limit revenue-earning opportunities.
Headline Expenditure Projections
Pharmaceuticals: RON14.94bn (USD3.73bn) in 2015 to RON15.89bn (USD3.76bn) in 2016; 6.4% in local currency terms and 0.7% in US dollar terms. Forecast unchanged from last quarter.
BMI View: This quarter our main assumptions for the sector remain virtually unchanged. We continue to forecast electricity generation to remain relatively flat - registering annual average growth of 0.88% between 2016 and 2025. Coal will remain the biggest component of the power mix, but gas will gain share as coal capacity is taken offline to comply with tightening EU emissions targets, and Romania boosts domestic gas production from the Black Sea towards the end of our forecast period.
Romania Real Estate
BMI View: A steady recovery in the Romanian economy, based on strong fundamental macroeconomics in terms of wages, consumer spending and employment figures, should see demand remain steady across the commercial real estate sector for 2016. Headwinds from EU economic uncertainty and lower global demand have seen buyers and tenants favour prime locations in established cities to avoid 'high-risk' assets. However, dwindling supply lines offer stability in rental rates, and rates have even seen incremental increases within the industrial sub-sector.
An optimistic outlook on the Romanian economy has seen investor sentiment rise across...
BMI View: We believe that Romania will be one of the fastest-growing economies across the EU during the next year, supported by strong private consumption, a tightening labour market and rapidly rising wages. This will continue to attract new investors and prompt expansion of the existing players in the country's rapidly developing retail market thus intensifying competition across the board. That said, we note that Romania, especially its rural areas, remain some of the poorest regions in the EU, and growth will come on a relatively low base.
|Headline Household Spending|
BMI View: Subscription-led growth is no longer possible in Romania's saturated mobile market. Network operators must deepen their relationships with existing customers, maximising monetisation opportunities. A paucity of high-speed wireline broadband networks was a key driver in 3G uptake, but premium service usage is low, souring investor appetites. Demand for converged services is growing, but Ancom's refusal to allow third parties to access cable operators' networks will impair further development.
|Broadband Shortfall Drives...|
BMI View: Romania's tourism market presents significant growth potential. The country offers a broad range of attractions catering to most holiday markets and is gradually becoming more accessible via improving air, road and rail transport connections. The low cost of travel and services means Romania is a highly affordable holiday destination for most source markets and there is potential for it to rival more established Central and Eastern Europe short-break destinations such as Prague and Budapest. We are forecasting healthy growth in arrivals to the country over the short- to medium-term, though we do note Romania's tourism industry remains vulnerable to regional economic decline due to its overreliance upon European neighbours.
BMI View: Although open to investment and private sector operators, we view the Romanian water sector as a risky proposition with limited potential at present. This is due to the limited infrastructure and high non revenue rates on the one hand, and the seeming prevalence of corruption scandals which are preventing the country from gaining much needed EU funding. The continued cancellation of vital infrastructure projects over 2014 and 2015 will mean that there is limited development in the quality of the infrastructure or the water and sanitation services over our forecast period through to 2019.
The expected rise in water extraction, consumption and untreated discharge stems from an increase in the number of households that have access to the water network as well as the expansion of the gold and coal mining sectors and the construction industry. These water-intensive industries, along with the...