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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Autos

Romania Autos

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: Over our forecast period to 2019, we expect Romania to experience strong food consumption growth amounting to 5.6% in CAGR terms and thus making Romania one of the fastest growing markets in Central and Eastern Europe (CEE). Growth rates are expected to remain somewhat slower in the shorter term, as the country is still recovering from the economic crisis, but will gradually accelerate towards the end of our forecast period.

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...

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Freight Transport

Romania Freight Transport

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BMI notes that 2014 saw increasing freight volumes across the whole of Romania's freight transport sector, and therefore forecasts further strong growth in line with the country's improving macroeconomic outlook.

We project total trade to pick up, with our Country Risk desk forecasting a y-o-y increase of 5.75% in 2015 following estimated growth of 5.70% in 2014.

Road freight continues to dominate the sector and is projected to grow by 2.3% in 2015. The mode did not manage to escape the downturn but so far appears to have defied European Union (EU) pledges of a decrease in road haulage across the region. This is not to say, however, that road freight's market share is safe.

BMI notes that rail is the likeliest candidate in Romania's freight transport mix to benefit from any diversification away from road, despite the...

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Information Technology

Romania Information Technology

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BMI View: We identify the Romanian IT market as being in a strong position to outperform its regional peers in terms growth rates 2015-2019. We estimate total IT market spending increased to RON5.3bn in 2014, and forecast a CAGR of 7.2% 2015-2019 in local currency terms. Growth of the economy and consumer spending, supplemented by government spending and policy support, will all help to develop the IT market in Romania. Meanwhile, we expect international vendor investment will continue to flow into Romania over the medium term to capitalise on rising incomes and low device and solution penetration rat...

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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 : 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 European...

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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: 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: 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: 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: 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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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 port...

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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

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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