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 economy will be a regional outperformer in 2015.

  • Low inflation, cheap borrowing costs and improving labour market conditions will conspire to drive a recovery in private consumption, which looks set to be the biggest driver of growth over the next few quarters.

  • A low public debt load and narrow budget deficit means the government will also play a bigger role driving growth, while remaining within EU debt and deficit limits.

  • Romania's widening current account deficit is unlikely to threaten financial stability, due to a stable funding structure.

  • Declining oil and food prices will drag down inflation, suggesting the central bank will remain in dovish mode in 2015.

  • New President Klaus Iohannis&#39...

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Romania Operational Risk Coverage (9)

Romania Operational Risk

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BMI View: There are numerous risks associated with investment in Romania. Endemic political corruption and poor contract enforceability hampers business operations and increases the costs and risks that investors will be exposed to illicit activity. Moreover, limited credit and slow wage growth inhibits consumer spending. Risks also include the ongoing brain drain and the poor quality of education in spite of good school attendance across all tiers of the education system. On the other hand, Romania's attractions include the large number of free trade agreements and free trade zone tax breaks. These complement the country's favourable geographic position between Western Europe and Asian and markets, in conjunction with its extensive (albeit underdeveloped and overburdened) transport networks. Due to these considerations,...

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Romania Crime & Security

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BMI View: Foreign workers and business in Romania benefit from generally low crime rates, a lack of domestic terrorist activity, and a stable international position, which results in a safe and secure operating environment. The main risks to expatriates and business operations stem from petty theft and cyber crime. In addition, Romania's international position has become more exposed due to Russia's interference in the Ukraine crisis. That said, the country's membership of NATO and the EU means that it benefits from the protection of powerful Western states. Consequently, Romania's overall score for BMI 's Crime and Security Risk Index, at 70.3 out of 100, ranks it highly in the region, in tenth place, and on a global scale, in 38 thout of 170 states.

Romania is a generally safe place for foreign business...

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Romania Labour Market

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BMI View: The labour force in Romania benefits from widespread literacy and growing enrolment rates in tertiary education, gradually improving the skill level of the labour market. In addition, labour costs including minimum wages and severance pay are lower than in other countries in the region. However, the availability of highly skilled workers is curtailed by an ongoing brain drain, while low urbanisation, poor female labour force participation and a highly corrupt and inefficient public healthcare system also restrict recruitment options. Overall, Romania underwhelms in the BMI Labour Risks Index, with a score of 54.4 out of 100, and a rank of 17th...

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Romania Logistics

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BMI View: Romania is one of the least developed EU member states, and as such its logistics network presents a number of challenges to incoming investors. These are most clearly manifested in the poor quality of transport and utilities infrastructure, which leads to supply chain delays and interruption of business activity. That said, the country is expected to record healthy economic growth, which will open up opportunities for investment over the medium term. In addition, the road and railway networks offer strong internal coverage and cross-border connections, while ongoing development will allow transport options to cater for growing trade volumes, and enhance Romania's position as a gateway to south-eastern Europe. Romania is placed in the middle of the pack on a regional comparison in the overall BMI Logistics Risk...

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Romania Trade & Investment

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BMI View: Romania presents some trade and investment risks in spite of its relatively open economy and harmonisation of EU regulations. Specifically, investors are exposed to increased risks and costs due to systemic corruption and poor contract enforceability. These risks are partially mitigated by favourable tax rates and attractive financial incentives. Overall, Romania places 14th out of 29 states in the Emerging Europe region, with a score of 58.2 out of 100 in the BMI Trade and Investment Risk Index, just ahead of Turkey.

Romania is a relatively open country for economic activity...

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Romania Industry Coverage (22)

Agribusiness

Romania Agribusiness

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To change the overall look of your document, choose new Theme elements on the Page Layout tab. To change the looks available in the Quick Style gallery, use the Change Current Quick Style Set command. Both the Themes gallery and the...

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Autos

Romania Autos

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In 2014, we forecast a 28.2% increase in vehicle sales in 2014 on the back of a recovery in the passenger car and commercial vehicle (CV) segments.

BMI forecasts a 29.5% increase in passenger car sales in 2014, on the back of low base effects from substantial declines in 2013, and pent-up demand from several years of sustained declines in the market and delayed purchasing decisions.

In 2014, we forecast a 26% increase in light commercial vehicle (LCV) sales due to pent-up demand in the market, low base effects from weak 2013 sales, and our expectation for a modest uptick in construction activity. These dynamics have also partly informed our forecast for a 10.1% increase in the heavy truck segment over the year.

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 occupies a strategically important position in Europe. The country is flanked by the former Soviet republics of Ukraine and Moldova. It also borders Hungary to the west, the former Yugoslavia to the south east and Bulgaria to the south west. Romania is now a member of NATO. 

We expect Romania to spend USD2.9bn on defence in 2014. This figure will be below the non-binding request of NATO for its members to spend a minimum of 2% of their GDP on defence annually. Romania will spend 1.7% of its GPD on defence in 2014. During 2014 reports stated that Romania may increase its defence spending in coming years as a result of Russia's involvement in Ukraine's civil war. Some members of the Romanian defence community are concerned that Russia could adopt a more regionally assertive stance towards its European neighbours. However, Romania has also pledged to...

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Food & Drink

Romania Food & Drink

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BMI View: Over the forecast period to 2018, Romania will experience moderate sales growth across most segments of the food and drink industry. Growth is expected to remain somewhat slower over the short term, as the country is gradually recovering from the economic downturn. The pace will pick up towards the end of our forecast period and will be driven by price rather than volume, thus indicating inflationary pressures and slowly returning premiumisation.

Headline Industry Data (local currency)

  • Food consumption growth year-on-year (y-o-y) in 2014: +5.1%; compound annual growth rate (CAGR) 2013-2018: +5.4%.

  • Per capita food consumption growth (y-o-y) in 2014: +5.3%; CAGR 2013-2018: +5.7%.

  • Alcoholic drinks value sales growth (y-o-y) in 2014: +3.7%; CAGR 2013-2018: +5.5...

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Freight Transport

Romania Freight Transport

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Following a year which saw increasing volumes across Romania's freight transport sector, we believe 2015 will signal further growth in line with the country's macroeconomic outlook.

Total trade is projected to pick up with our Country Risk desk forecasting a year-on-year (y-o-y) increase of 6% in 2015, following an estimated growth of 6.5% in 2014.

Road freight will continue to dominate the sector, with growth of around 2% projected for 2015. The mode did not manage to defy the downturn, but so far appears to have defied European Union (EU) pledges to cut road haulage across the region - that is not to say, however, that the road freight's market share is necessarily safe.

BMI notes that rail is the likeliest candidate in Romania's freight transport mix to benefit from any diversification away from road, although currently it is expected to grow at a slower pace. In the longer term the mode might...

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Information Technology

Romania Information Technology

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BMI View: We forecast total IT market spending will increase to RON5.3bn in 2014, an increase of 9.8% in local currency terms. Growth of economy and consumer spending growth in addition with government spending will spur the IT sector expansion in Romania. The government is to invest EUR3.9bn into the country's IT sector and a number of multinational companies have recently announced expanding their operations in Romania.

Headline Expenditure Projections

  • Computer hardware sales: RON2.8bn in 2013 to RON2.9bn in 2014, +8.1% in local currency terms. A return to growth for desktop and notebook sales will supplement strong growth in tablet volumes in 2014.

  • Software sales: RON1.1bn in 2013 to RON1.2bn in 2014, +10...

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Infrastructure

Romania Infrastructure

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BMI View: BMI downgraded its outlook for the infrastructure sector in Q2 2015 report as Romanian construction sector fell back into recession in 2014 primarily due to the lack of new projects that would drive growth. A number of mismanaged and cancelled projects dampened the construction sector's performance and weighed heavily on civil engineering sector. As the government announces new tenders and works on a framework strategy for the transport sector, the EU's 2014-2020 cohesion funds will start filtering through, however, BMI is yet to see a turnaround. Consequently, BMI forecasts cautious recovery only as of 2016. Residential and non-residential sectors as well as the energy sector will be adding upside risk to our forecast as rising GDP per...

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Insurance

Romania Insurance

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BMI View : Romania's insurance market remains underdeveloped, with penetration currently trending at less than 0.5% relative to GDP. Low income levels and limited levels of disposable income have hampered market growth, particularly with regard to the life insurance segment which only occupies around 0.2% of GDP. The reinsurance sector is also small by regional standards, particularly in terms of the life segment, where annual premiums are negligible. Meanwhile, the non-life insurance market is heavily weighted towards motor vehicle and property insurance which together occupy around 90% of total premiums. Despite obvious challenges, the market has seen a number of new entrants over the past few years, including major Western...

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Medical Devices

Romania Medical Devices

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BMI Industry View: The Romanian medical device market is projected 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...

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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: We expect Romania's mining sector to see only modest growth over the coming years as coal output, which accounts for the majority of the mining sector's value, sees little expansion. Gold production growth will only be marginally more inspiring as weak prices and intense public opposition weigh on the gold industry's growth prospects. Overall, we forecast Romania's mining sector value to grow from USD1.8bn to USD1.9bn from 2014-2018.

Modest Growth Prospects
Romania: Mining Industry Value & Production Growth Forecasts
...

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Oil & Gas

Romania Oil & Gas

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BMI View: ExxonMobil has completed the Domino-2 appraisal well and is awaiting analysis. Meanwhile it spud the Pelican South-1 well also in the Neptun block. The results of exploration efforts in the Black Sea have the potential to transform upstream gas production, while redevelopments and EOR are boosting oil. Upgrades are helping to improve efficiencies in the refining sector, though a weak demand market and alleged corruption highlight the ongoing challenges.

...
Headline Forecasts (Romania 2013-2019)
2013e

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Petrochemicals

Romania Petrochemicals

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Following Romania's repeated attempts to privatise petrochemicals producer Oltchim in 2014, the company's receivers are now looking at restructuring to make it profitable. BMI's latest Romania Petrochemicals Report states that the process is likely to involve some reduction in capacity in order to improve profitability in the country's small and ailing petrochemicals sector.

In 2014, Romania had modest olefins capacities of 200,000 tonnes per annum (tpa) ethylene and 100,000tpa propylene feeding capacities totalling 320,000tpa polyethylene and 80,000tpa polypropylene. Romania also has 60,000tpa polystyrene and 170,000tpa polyvinyl chloride (PVC). As such, the industry is small and lacks economies of scale to compete with foreign producers. Also, it is constrained by the problems at Oltchim, caused in large part by the closure of the Arpechim refinery that fed it naphtha feedstock.

...

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Pharmaceuticals & Healthcare

Romania Pharmaceuticals & Healthcare

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BMI View: We expect Romania's pharmaceutical market in 2015 to be initially driven by a consumer-led recovery as falling fuel and food prices, rising wages and declining unemployment drive pharmaceutical consumption, but local regulatory factors such as revenue taxes will continue to present obstacles to growth. Over the longer term, we expect the underfunding of the healthcare system to be addressed and given the country's ageing population, a broad based boost in expenditure from both public payers and consumers will drive continued growth in the pharmaceutical market.

Headline Expenditure Projections

  • ...

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Power

Romania Power

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BMI View: 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. Renewables will also continue to play an important role, although the scaling back of the government's support will slow investment. Consumption will fluctuate depending on growth but the broad trend will be upwards. Electricity prices will moderate as the implicit subsidy for green energy is lifted. The government will remain committed to privatisation of the power sector, increasing the potential for market-driven competition.

Key Trends And Developments

  • A new government strategy for 2015-25 highlights the increasingly decrepit state of much of Romania's electricity infrastructure. According to the report, many of the country's electric...

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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: Romania continues to be one of the most promising markets in Central and Eastern Europe. The competition in the retail market is set to intensify as multiple chains are expanding their networks and household income is approaching the average income found in the EU. The country boasts one of the largest populations in the region and proactive market supervision institutions. However, the country's economic growth will slow down as the whole EU faces deflationary threats. We anticipate both the country's GDP and total household spending in US dollar terms to decline in 2015 and recover later into our forecast period.

Even though it remains one of the poorest countries in the EU, Romania has managed to...

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Shipping

Romania Shipping

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The port of Constantza, Romania's main maritime facility, is forecast to see steady growth both in terms of total tonnage and container throughput in 2015 in line with the country's continued economic recovery and despite weak eurozone demand limiting exports to the region.

We expect, however, household and government spending to play an increasingly large role driving growth and supporting freight volumes at the country's ports.

Over the medium term, we forecast further growth at the port of Constantza and the recovery of its pre-downturn total throughput volumes, while container throughput is projected to remain below 2007-2008 levels.

Headline Industry Data

  • 2015 port of Constantza tonnage throughput forecast to grow 3.8%, over the medium term we project a 20.5% increase.

  • 2015...

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Telecommunications

Romania Telecommunications

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BMI View: The Romanian mobile market is struggling to recover from declines seen in 2011-2012 as growth failed to return in 2014. BMI believes this to be a result of cautionary consumer habits during a period of economic weakness as well as discounting inactive subscribers. As GDP per capita rebounds as of 2015, the Romanian telecommunications sector will recover in lock-step, but despite this, the market will only grow an average of 0.4% per annum until the end of our forecast. The medium-term outlook is mixed in Romania, with continued price competition and economic challenges posing downside rise. However, rising smartphone penetration offers upside via the development of mobile data and value-added services such as mobile payment services. In the wireline sector we should see competition increase...

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Tourism

Romania Tourism

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BMI View : While Romania boasts a wide array of tourist attractions, its tourism market is underdeveloped and facing significant challenges (such as poor infrastructure and political tensions in neighbouring countries). In addition, Romania has been overly reliant on attracting visitors of neighbouring countries and has struggled to attract visitors from more prosperous countries. However, if it can convince countries such as Germany and the Netherlands that it can function in the Schengen Area, inbound and outbound travel are likely to increase substantially.

The mixture of resorts and natural beauty combined with geographic locations and a lower cost of goods and services means that Romania is an attractive country to visit, particularly for countries with lower purchasing...

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Water

Romania Water

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BMI View:  This quarter we have substantially expanded our forecasts for the Romanian water sector, and now cover extraction by source, household and mains water consumption (instead of drinking water consumption), non mains consumption, we also cover treated wastewater, and wastewater by origin. Overall, we have adopted an extremely positive outlook for the water and sanitation sectors, with good investment in supply and treatment facilities and networks. This in turn is offering potential opportunities of the water infrastructure companies, and we view Romania as one of the most attractive and active European water infrastructure sectors, with a more extended project pipeline that the majority of its peers. The existing infrastructure and services sectors are also of a predominantly better quality than other emerging Europe countries, offering a larger more reliable water source to heavy water...

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