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
The creation of a new technocratic government in November 2015 does not change are fundamentally bullish growth outlook for Romania.
The new administration will broadly adhere to fiscal and economic plans laid out by the previous Social Democratic Party (PSD)-led government, which will be supportive of growth.
The opposition National Liberal Party (PNL) look odds on to win the next election, due in late 2016.
Romania's current account deficit will expand over the coming years, as robust domestic demand underpins stronger import growth.
Planned VAT cuts will ensure that disinflationary pressures persist for longer in Romania than regional peers. However, the central bank will refrain from cutting rates below the current 1.75% level in 2016....
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: 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 16th out of 31 states in Emerging Europe, behind Azerbaijan and shortly ahead of Lithuania....
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 sector, which is placing...
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 within 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 And Regional Average Trade And Investment...|
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: 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...
Food & Drink
Romania Food & Drink
BMI View: Romania's food and drink industry will outperform in the Central and Eastern Europe region. We forecast the food and drinks sector to grow at an average annual rate of 5.6% over 2014-2019. Planned and implemented VAT cuts on food and drinks will drive growth in the short term. Additionally, the mass grocery retail sector stands to gain from increased sales in food and beverages.
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: +3.4%; CAGR 2014-2019: +6.0%.
Soft drinks value sales growth (y-o-y) in 2015: +4....
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 Information Technology
BMI View: The Romanian government's expansionary fiscal and economic policies will contribute towards stronger growth in 2016, with positive benefits for the fostering of the IT industry. Economic growth is strong in Romania and our in-house Country Risk Team gives Romania a positive and stable macroeconomic outlook for this year. Taxation cuts are bound to boost household spending and purchasing power whereas rising employment and growth in wage structures, particularly in the manufacturing and ICT sectors, will further boost disposable income. Many international vendors are positioning themselves to capitalise on the gains of the IT market and EU funding will drive forward internet,...
BMI View: A change of government in late 2015 has not substantially altered our positive outlook for Romania's construction sector going forward. Demand in the residential sector continues to grow, driven by rising household income rates and falling unemployment, as well as short-term tax cuts. In the transport sector, major funding from the European Union is supporting development of road and rail connections, though we note airports remain neglected. The outlook in the power sector is more subdued, with high-profile nuclear power projects subject to ongoing delays. While expanding public spending will support growth through to 2020, over the remainder of the forecast period, growth will be more subdued as foreign funding declines.
Latest Updates And Structural Trends
BMI View: We believe that Romania's insurance market offers substantial growth potential over the next few years, with a stable political and economic environment providing a platform for increased household spending and demand for personal insurance lines. At present, insurance penetration and density are low by European standards and areas such as health and life insurance are at an embryonic stage of development. Meanwhile, consolidation between smaller local insurers may provide opportunities for existing multinationals or indeed new entrants.
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 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|
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...
Oil & Gas
Romania Oil & Gas
BMI View: Field redevelopments will prop up oil and gas production to 2017 with longer-term growth driven by Black Sea projects. Refinery output and fuels demand have both improved on the back of lower oil prices.
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.
Plastic and rubber output grew 7.6% year-on-year (y-o-y) in the first 10 months of 2015, continuing the robust growth reported in 2014. On the downside, the chemicals sector reversed much of the growth seen in the previous year, falling 2.3% y-o-y. The troubled Romanian producer Oltchim is seeing a turnaround as a result of growth in polymers with a 31% increase in the valueof sales in 9M15 and a massive drop in losses.
Nevertheless, Romania has modest olefins capacities of 200,000 tonnes per annum (tpa) ethylene and 100,000tpa propylene, feeding capacities totalling 320,000tpa...
Pharmaceuticals & Healthcare
Romania Pharmaceuticals & Healthcare
BMI View: Consumer healthcare will be a key growth sector in the Romanian pharmaceutical market - supported by strong patient demand and the expansion of pharmacies in the country. This comes as the sector is supported by positive pricing and advertising regulations in the country, thus allowing firms to leverage upon the expansion of pharmacies as well as the trend of self medication among younger patients. Household incomes are also expected to rise in line with Romania's economic outperformance in Europe, further buoying OTC drug sales, but also supporting wider pharmaceutical sector.
Headline Expenditure Projections
Pharmaceuticals: RON14.19bn (USD4.28bn) in 2014 to RON14.94bn (USD3.67bn) in 2015; +5.3% in local currency terms and -14.3% in US dollar terms. Forecast...
BMI View: This quarter we have downgraded our power forecasts for Romania to reflect our view that the completion of the country's flagship Cernavoda 3 and 4 reactors is unlikely before the end of our forecast period in 2024. Overall, the decision to exclude the Cernavoda reactors from our forecast has had a significant impact on our outlook for the Romanian power sector and means we expect the country to remain more reliant on coal and gas than previously anticipated. We forecast electricity generation will remain relatively flat - registering annual average growth of 0.9% between 2015 and 2024. Coal will remain the biggest component of the power mix, but gas will gain share as coal capacity is take 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: With growing public confidence in the current parliamentary administration and rising household spending, we believe that Romania's commercial real estate sector is set to experience buoyant growth, rendering it an attractive investment opportunity. However, companies should remain vigilant as to the situation regarding the stagnation in rental rates as a result of high vacancies.
The Romanian economy looks to outperform its CEE peers over the 2015 and 2016 period as improved government fiscal policy and robust consumer spending drive economic growth further than peripheral EU emerging economies. Due to the favorable conditions witnessed, we have revised our GDP forecast from 3.4% to 3.6% for 2015 and 2016, exceeding prior prospects and revealing the growing potential for the Romanian economy. Looking ahead in the forecast period, we expect to witness increasing public...
BMI View: Despite being one of the poorest countries in the EU, Romania possesses one of the most promising income growth outlooks. As a result, we are anticipating robust growth in household spending throughout our forecast period and this will equate to considerable gains for retailers, particularly those in the MGR sector. While the country's population is on the decline, the market remains large and less saturated when compared other countries in the region.
|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 is underdeveloped and the country is struggling to raise awareness of the many attractions outside of its traditional source markets in Central and Eastern Europe. Over the course of our forecast period to 2019 we do expect to see a gradual increase in the number of international visitors to the country, which will provide a valuable boost to the hotel and restaurant industry and tourism related expenditure. However, Romania's tourism market is at risk from regional political tensions as well as economic factors which have the potential to derail growth.
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...