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.

Country Risk

Romania Country Risk

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Core Views:

  • Romania's bullish growth story will continue in 2015, led by robust consumer spending and as the government adopts an increasingly expansive fiscal policy.

  • A planned VAT cut in June will drag Romania into deflation in H215. This will boost household spending, but also ensure that the central bank remains firmly in dovish mode.

  • Romania will pursue an increasingly expansionary fiscal policy over the next few years, in the run up to parliamentary elections planned for 2016.

  • We see limited risks posed by Romania's expanding current account deficit, as recovering domestic demand boosts import growth over 2015 and 2016.

  • The Romanian government's position will weaken further over the coming quarters, amidst corruption scandals and the growing...

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Romania Operational Risk Coverage (9)

Romania Operational Risk

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BMI View: Romania presents investors with a range of potential operational risks, not the least of which is the endemic corruption in the political and judicial system which undermines the operating environment and dampens investor confidence. 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, healthy economic growth and lack of trade barriers. As such, Romania just squeezes into the top ten in Emerging Europe, sitting in ninth place with a score of 60.5 out of 100 on the BMI ...

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Romania Crime & Security

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BMI View: Overall Romania enjoys a strong crime and security environment. There is a very low threat from terrorism, with no recognised domestic terror organisations and only limited risk from international terror groups. Membership of bodies such as NATO and the EU has helped Romania develop a strong strategic international environment and the country has benefited from international training and expertise. The biggest risks for foreign workers stems from petty theft, and, increasingly, cyber crime including credit card fraud. Consequently, Romania has a score of 66.9 out of 100 on the BMI Crime and Security Risk Index, placing the country 10th out of 31 countries in Emerging Europe, and 54th out of 201 states on a global basis.

As noted above, the biggest threat to foreign workers and other foreign workers is posed by the extent of petty crime...

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Romania Labour Market

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BMI View: Romania does present investors with a large potential labour pool, which benefits from strong literacy rates and a large number of tertiary education graduates in key disciplines as well as a low minimum wage and high degree of labour flexibility. There are however significant concerns relating to the declining enrolment rate at all levels of education, and the disparity in the quality of education on offer in different regions of the country. This is compounded by limited female labour force participation and a very small migrant workforce. As a result, Romania is a regional underperformer on the BMI Labour Risks Index, with a score of 55.6 out of 100 placing the country 16 thout of 31 states in Emerging Europe, behind Azerbaijan and shortly ahead of Lithuania.

Romania has...

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Romania Logistics

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BMI View: The logistics network in Romania presents potential investors with both challenges and benefits. While the country has strong regional and international trade connectivity via extensive road, rail and maritime links, the quality of the transport network suffers from underinvestment and can be the cause of delays. Similarly, while there are few bureaucratic hurdles for importing and exporting goods, this is offset by the relatively high cost of transport freight to and from the country. And while Romania enjoys security of fuel supplies, the costs of said fuel is again higher than the regional average. As such, Romania has a middling score of 57.2 out of 100 on the BMI Logistics Risk Index, placing the country 13th out of 31 Emerging Europe states, and 65th out of 201 states globally.

Romania has a strong export...

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Romania Trade & Investment

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BMI View: Membership of the EU helps to ensure Romania offers an open economy with very few restrictions on foreign investment or the movement of goods, making it an attractive potential investment destination. There are, however, ongoing concerns surrounding corruption which is pervasive in the judicial and governmental systems and inadequate intellectual property protection is also a risk as Romania struggles to enforce existing legislation. These factors dampen Romania's overall performance on the BMI Trade and Investment Risk Index, and the country sits in 11 thplace out of 31 countries in Emerging Europe with a score of 62.3 out of 100.

Romania's performance in terms of investment and trade openness is positive - as a member of the EU, Romania benefits from tariff free trade across the 26...

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Romania Industry Coverage (22)

Agribusiness

Romania Agribusiness

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BMI View: We still believe the Romanian grain sector has the highest growth potential owing to its competitiveness and its exposure to the Middle East and Asia. We believe that the country's poultry sector will outperform the rest of the livestock sector, owing to strong demand from Romania's population. The country's dairy and sugar industries are likely to moderately benefit from the abolition of the EU's production quotas in milk (from spring 2015) and sugar (from September 2017).

Agribusiness Market Value
BMI Market Value By Commodity (2011-2019)
...

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Autos

Romania Autos

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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.

In 2014, passenger car sales increased 2.1%, to 70,217 units, Growing consumer sentiment started translating into an uptick in big-ticket purchases, such as new autos, following a period of reticence from consumers; in previous years, modest improvements in GDP growth had not translated into improved car sales, and the market declined as people delayed car purchases. From 2015 over the remainder of our five year forecast period to 2019, we expect to see robust growth in the autos market, as improvements private consumption translate into improved autos sales as consumer sentiment for big-ticket purchases increases.

BMI maintains a bearish outlook for business and manufacturing growth in Romania. Weakening access to credit for many businesses has led to a...

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Commercial Banking

Romania Commercial Banking

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...
Commercial Banking Sector Indicators
Date Total assets Client loans Bond portfolio Other Liabilities and capital Capital Client deposits

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Defence & Security

Romania Defence & Security

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BMI View: Romania historically has under-spent on its defence requirements. The country has a well-established defence industry, and significantly faces regional security concerns which will encourage future defence spending trends. At the industrial level, its companies are working to establish relationships and to deepen cooperation regarding defence design, development and production. Meanwhile, the country's defence relationship with the United States is expanding. This is the result of the country's important role in the NATO European Phased Adaptive Approach ballistic missile defence initiative.

Although having an important position as a Warsaw Pact member during the years of the Cold War, Romania has worked hard to develop an indigenous defence industry, and a high level of defence self-sufficiency to this end. In particular, the country has established a strong track...

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Food & Drink

Romania Food & Drink

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BMI View: Romania's food and drink sector will be a regional outperformer over the next five years, driven by an improving labour market, real wage growth and low levels of inflation. A VAT cut on food products from June 2015 will provide an additional boost to the sector. The food retail sector will also benefit from this positive outlook, with further investment to come as the sector consolidates.

Headline Industry Data (local currency)

  • Food consumption growth year-on-year (y-o-y) in 2015: +5.2%; compound annual growth rate (CAGR) 2014-2019: +5.6%.

  • Per capita food consumption growth (y-o-y) in 2015: +5.5%; CAGR 2014-2019: +5.9%.

  • Alcoholic drinks value sales growth (y-o-y) in 2015: +3.5%; CAGR 2014-2019: +6.0%.

  • Soft drinks...

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Freight Transport

Romania Freight Transport

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Freight volumes in Romania will increase strongly in 2015, on the back of strong domestic economic growth and an improving regional picture, particularly within Germany and the eurozone. We forecast real GDP growth of 3.6% in Romania in both 2015 and 2016, which will drive total trade within the country. Air freight growth will outperform both road and rail, though will remain a minimal transportation service within the general freight sector. Road volumes will continue to dominate, and investment from the Romanian government and the EU will ensure that this remains the case over the next few decades.

The improving economic situation in Romania and the eurozone will lead to stronger trade activity over 2015 and beyond. We forecast real GDP growth of 3.6% in Romania in both 2015 and 2016, and we hold a more positive outlook regarding eurozone economic growth following an improving domestic consumption picture across many countries and...

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Information Technology

Romania Information Technology

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BMI View: Expansionary government fiscal policy will contribute to strong economic growth over the course of 2015, with benefits for the development of the IT industry. Tax cuts in particular will boost household spending, combined with rising employment and average wages, particularly in the manufacturing and ICT sectors. We estimate a five-year CAGR in IT spending of 7.2% between 2015-2019 in local currency terms, one of the highest rates in the region. Many international companies (particularly hardware vendors) are positioning themselves to capitalise on this surge, setting up local offices and units in Romania, as devices penetration shows room for growth. Rural communities in particular will reap the benefits of EU funding, with...

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Infrastructure

Romania Infrastructure

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BMI View: Given the strengthening outlook for the Romanian economy and the government's more stable fiscal position after years of tight spending, we have upgraded our forecasts for Romania's construction sector. We now forecast real growth of 3.9% year-on-year in 2015, followed by 4.2% in 2016.

Key Trends And Developments

  • The transport masterplan was published in November 2014 and it revealed that the country needs to invest about EUR50bn (USD61.97bn) through to 2030 to enhance and expand its transport infrastructure. The European Commission (EC) will provide funds worth EUR6.8bn (USD7.21bn) until 2020 for infrastructure projects included in the Transport Masterplan of Romania. The EU will fund 25% of the cost of the plan, while the Romanian government will cover 15%, with the remainder being secured from loans from the...

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Insurance

Romania Insurance

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BMI View : Over H115, nothing has happened to change our view that premiums should grow steadily over the coming years in both Romania's life and non-life segments. Prices in the important motor vehicle sub-sector of the non-life segment may have stabilised while volumes have been growing. In the life segment, the continuation of strong sales of unit-linked products has surprised us. We remain of the view that growth in life premiums (including renewal premiums) will be fairly slow over the course of the forecast period. This is because of structural constraints such as the low incomes of some households and preferences for other channels of organised savings. We would not be surprised if...

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Medical Devices

Romania Medical Devices

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BMI Industry View: We project the Romanian medical device market to grow by a CAGR of 2.9% over the 2013-2018 period, in line with economic growth and rising health expenditure. The scarcity of high-tech equipment and the 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 2013, the Romanian medical device market was...

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Metals

Romania Metals

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BMI View:  Romania's metals sector will continue to see modest growth over the coming years as it slowly recovers from the global downturn. This is primarily the case for steel, the largest sub-component of Romania's metals sector. With modest growth in both autos production and the country's construction sector, we expect modest growth in steel output over the next five years. In addition, with our expectation for steel prices to head broadly lower over the coming years, we see few sources of encouragement for the sector. Therefore, whilst we forecast modest growth in output, it will remain far off 2007 highs. 

No Return To Highs
Romania - Steel Output
...

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Mining

Romania Mining

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BMI View: The expansion of Romania's mining sector will be sluggish over the next few years as a declining coal industry and local opposition to mining projects limits potential growth in minerals output. Good news on the horizon is Eldorado Gold's Certej gold mine, which is set to come online from 2016.

Romania has significant mineral reserves with the country boasting some of the largest coal and gold deposits in Europe. Production levels are among the highest in Central and Eastern Europe (CEE), however, growth is slowing due to a combination of factors including falling coal grades, compliance EU carbon emissions targets and opposition to mining activity at both a community and government level.

In particular the production of Brown coal, also known as lignite, is set to decrease gradually through our forecast period to end-2019 as EU CO2 emissions legislation forces the...

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Oil & Gas

Romania Oil & Gas

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BMI View: Field redevelopments will prop up oil and gas production to 2017 with longer-term growth driven by Black Sea projects. The refining sector continues to modernise but downsize to remain competitive.

Headline Forecasts (Romania 2013-2019)
2013 2014e 2015f 2016f 2017f ...

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Petrochemicals

Romania Petrochemicals

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Romania's petrochemicals industry witnessed a downturn in growth in 2014 with a contraction in the fourth quarter. The outlook for the short to medium term is more positive with BMI's latest Romania Petrochemicals Report anticipating improved growth in the automotive and construction sectors.

In 2014, chemicals output grew 2.6% while rubber and plastic grew 5.6%, but growth rates were dragged down by poor performance in Q414. The decline had both demand and supply side causes. In terms of demand, the decline in industrial growth in the final months of 2014 had negative effects on petrochemicals consumption. On the supply side, the financially troubled polymer producer Oltchim is dragging down performance in the sector. Privatisation attempts have failed and the company is operating plants at under a quarter of capacity.

In 2014, Romania had modest olefins...

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Pharmaceuticals & Healthcare

Romania Pharmaceuticals & Healthcare

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BMI View: We expect growth in pharmaceutical sales in 2015 to be primarily driven by Romania's improving macroeconomic outlook and a positive consumer story. We note that local regulatory factors such as revenue taxes will continue to present obstacles to growth. Rising clawback taxes and continued price cuts will be negative for the prescription drugs, hurting Romania's attractiveness to multinational drugmakers.

Headline Expenditure Projections

  • Pharmaceuticals: RON14.17bn (USD4.28bn) in 2014 to RON14.75bn (USD3.62bn) in 2015; +4.1% in local currency terms and -15.3% in US dollar terms.

  • Healthcare: RON34.69bn (USD10.47bn) in 2014 to RON36.38bn (USD8.93bn) in 2015; +4.9% in local currency terms...

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Power

Romania Power

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BMI View: We maintain our view that nuclear power will be key to driving Romania's energy sector given the prospect of massive Chinese and Canadian investment in the second half of the decade. Gas will also play an important role, with our O&G analysts forecasting Romania to become a net gas exporter from 2020 onwards. This will fuel an increase in gas-power electricity generation, which according to our forecasts will reach 11TWh in 2024, compared to 8.02TWh in 2014. Finally, we...

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Real Estate

Romania Real Estate

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BMI View: Having lagged behind much of Central and Eastern Europe (CEE), a robust and fast growing Romanian economy will provide the principal driver for the country's commercial real estate sector over the next two years. This stable backdrop will allow Romania to put itself increasingly on the radar of the international investment community, as the country acquires something of a safe haven status amid political and economic upheaval to the east and west of the country. However, we note that heavily levels of existing rental stock will prevent rental rates from moving upwards over our forecast period.

The Q1 2015 Romania Real Estate focuses on the rental market performance of the office, retail and industrial commercial real estate segments in three key cities - Bucharest, Cluj-Napoca and Brasov. A key focus of our research over recent quarters...

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Retail

Romania Retail

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BMI View: In contrast with the majority of the EU countries, Romania has promising retail growth opportunities. The economy will be growing steadily stimulating household income and consumer spending. The Romanian retail sector is set to expand in volume and diversify as the country becomes increasingly more appealing to both domestic and foreign investors.

With more than 21mn people, Romania is one of the largest countries in the CEE, and has been growing faster than the bloc's average. BMI expects that real GDP in leu terms will rise by 3.3% this year and by 3.6% in 2016. Household spending will rise along with the overall economy as unemployment decreases and the middle class grows at one of the fastest rates in the continent. Average wage in the country is second lowest in the EU, however, it has grown by 25% since 2009 indicating the high rate at which the...

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Shipping

Romania Shipping

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Romania's main maritime facility, the port of Constantza, once again will see steady growth in 2015, according to BMI forecasts, both in terms of total tonnage and container throughput, in line with the country's continued economic recovery and despite tepid eurozone demand limiting exports to the region.

We expect, however, that low inflation, cheap borrowing costs and improving labour market conditions will conspire to drive a recovery in private consumption, which will play an increasingly large role driving growth and supporting freight volumes at the country's ports.

We forecast further growth at the port of Constantza and the recovery of its pre-downturn total throughput volumes over the medium term. Container throughput, however, is projected to remain below 2007-2008 level.

Headline Industry Data

  • ...

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Telecommunications

Romania Telecommunications

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BMI View: The Romanian market has seen impressive growth in internet data usage over the past year, as consumers become more focused on broadband access. In particular, the 3G and 4G segments have contributed to a strong rebound for mobile operators, amid falling 2G users and inactive SIM cards. Romania's 3G/4G market will grow to be one of the most highly penetrated in Central and Emerging Europe by 2019 and this will lead to opportunities potential for value-added services. Consolidation has been the key trend in the wireline market over this same period, as the smaller, local players are acquired by the national operators. This will have long-term benefits for the provision of high-speed broadband, however, if too many players are lost this poses a risk to competition dynamics.

...

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Tourism

Romania Tourism

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BMI View: Romania's tourism sector has vast potential, yet lack of investment and strong competition from neighbouring countries mean that it remains underdeveloped. While tourist numbers have been growing over recent years - thanks, in part, to greater Economic integration - low standards of tourism infrastructure, poor quality accommodation and services, insufficient promotion of tourist products, and low levels of state investment in the sector have constrained its development. As these issues are being addressed, we expect to see steady growth in Romania's tourism sector and an increase in the number of tourist arrivals to the country, creating an attractive potential investment environment.

Romania has a harmonious and diverse landscape, which offers significant opportunity to investors in the tourism sector. The country...

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Water

Romania Water

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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...

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