Our comprehensive assessment of Romania's operating environment and the outlook for its leading sectors are formed by bringing together a wealth of data on global markets that affect Romania, as well as the latest industry developments that could impact Romania's industries. This unique integrated approach has given us an impeccable track-record for predicting important shifts in the markets, ensuring you’re aware of the latest market opportunities and risks in Romania before your competitors.

Country Risk

Romania Country Risk

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Core Views:

  • Romania's economic recovery will outperform most regional peers and move onto a firmer footing over the coming quarters, with household consumption set to compensate for net exports' lower contribution to growth.

  • While recovering imports and outgoing profit repatriation will widen the current account deficit, this will not pose a threat to the country's ongoing recovery.

  • The National Bank of Romania (NBR) is likely to cut the policy rate to at least 3.00% by year-end, in an attempt to boost inflation and stave of excessive leu strength.

  • Romania's government are likely to ease up on the pace of fiscal austerity in 2014 and 2015, but will remain within EU budget and public debt targets.

  • We expect Prime Minister Victor Ponta to win the November Presidential...

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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 high labour costs, the small labour force and 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, Romania scores 59 out of 100 in the overall BMI ...

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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 l abour force in Romania benefits from strong literacy rates, with an average proportion of the population available to participate in the talent pool. In addition, two thirds of the population have received secondary education and tertiary penetration rates are growing. However, high labour tax and contribution costs increase the cost burden on employers and inhibit the flexibility of the labour pool. In total, Romania underwhelms in the BMI Labour Risks Index, with a score of 54.9 out of 100, and a rank of 21 st  out of 30 Emerging Europe countries in the regional comparison.

The labour force in Romania is small when compared to neighbouring states, but only a few percentage points below the EU...

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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 harmoni s ation 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 15 thout of 30 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 due to its market-oriented economy...

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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. Sugar production is likely to grow strongly because of base effects, as limited consumption growth from both the food and energy sectors will cap production incentives. The livestock sector will remain just below self-sufficiency, and quality issues linked to the horsemeat scandal will limit export growth opportunities to the rest of the EU, at least in the near term.

The Importance Of Grains
Romania - BMI Market Value By Commodity (% of total)
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Autos

Romania Autos

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In 2014, we forecast an 8% increase in vehicle sales in 2014 on the back of a recovery in the passenger car and commercial vehicle segments.

BMI forecasts an 8.6% 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 3.1% increase in light commercial vehicles 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 reduction...

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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. In addition, Romania is now a member of NATO.

The government of Romania has stated that it plans to increase defence spending during 2014 in light of the ongoing civil war in Ukraine. It is not clear what the increase in defence spending will be used for, and there has been no announcement to this effect from the Romanian government. In recent years, the country has sought to overhaul its military to ensure that it can operate alongside its other NATO allies. These efforts have principally rested on the acquisition and upgrade of advanced command and control systems such as tactical radios and communications...

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Food & Drink

Romania Food & Drink

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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 still recovering from the economic crisis. 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) to 2018: +5.4%.

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

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

  • Soft drinks value sales growth (y-o...

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Freight Transport

Romania Freight Transport

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Following a year in which BMI believes saw mixed growth dynamics in different modes of Romania's freight transport sector, 2014 will signal increasing volumes across all sectors 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 4.75% in 2014 following a growth of 7.98% in 2013.

Road freight is to continue to dominate the sector and is projected to grow by 3% in 2014. The mode did not manage to defy the downturn but so far appears to have defied European Union (EU) pledges of a decrease in road haulage across the region, that 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, although currently is...

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Information Technology

Romania Information Technology

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BMI View: the Romania IT market is forecast outperform the majority of its peers as a result of a strong economic recovery and its position as a regional centre for skilled IT professionals.   We forecast total IT market spending will increase to RON 5.4 bn in 2014, growth of 9.1% in local currency terms from 2013.  Over the medium term i ncome growth will support the retail hardware market , while improvements to telecommunications infrastructure is forecast to accelerate the development of Romania as an outsourcing and cloud computing market. However, r egional economic and security...

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Infrastructure

Romania Infrastructure

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BMI View:     BMI believes that Romanian construction 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 have also dampened the construction sector's performance. 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. Consequently, BMI forecasts cautious recovery 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 capita will add buoyancy to the housing construction and forthcoming Chinese financing will prop the energy sector.   Poorly managed and cancelled road...

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Insurance

Romania Insurance

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BMI View :  At some point, there will be a decisive improvement in premiums and/or profits for Romania's long-suffering non-life companies. However, this is very unlikely to occur in 2014 or 2015. It is still easy to identify reasons why premiums are likely to shrink and why costs could increase (aside from substantial claims arising from the massive floods across Romania during the middle of this year). We are surprised that foreign companies, from Bulgaria and elsewhere, are still entering the non-life segment. The life segment appears set to grow slowly (if at all) and will still be very under-developed by most metrics at the end of the forecast period.

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None of the trends that are evident in the non-life segment, which dominates Romania's insurance sector, are positive. Thanks to cut-throat competition, prices in the...

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Medical Devices

Romania Medical Devices

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Espicom Industry View: The Romanian medical device market is projec ted 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 im ports as the domestic industry mainly produces outdated equipment that can only compete with foreign products in terms of price .

Headline Industry Forecasts

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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 downtur n. 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. 

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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   is drilling the Domino-2 appraisal well which has the potential to transform the Romanian upstream if successful. Further exploration efforts in the Black Sea from international oil companies create upside risk to the country's production outlook. The growing presence of IOCs is a necessary step to take advantage of Romania's increasingly expensive and technically challenging oil and gas developments.   Chevron is restarting shale gas exploration after suspending operations since October 2013 due to protests.

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Headline Forecasts (Romania 2012-2018)

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Petrochemicals

Romania Petrochemicals

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BMI View : The failure to privatise the troubled local petrochemicals producer Oltchim in H114 is weighing heavily on the prospects for the Romanian petrochemicals industry, in spite of the strengthening performance of the local market, according to BMI 's latest Romania Petrochemicals Report.

In the first four months of 2014, chemicals output rose 6.1% and rubber and plastic grew 8.7%, compared to the industrial average of 8.2%. This follows 11.7% growth in rubber and plastic and 12.5% growth in chemicals in 2013. Oltchim is reportedly operating at under a quarter of its capacity, a situation that was undermining its profitability at a time when the government is planning to privatise it. The government is seeking to boost capacity utilisation to 50%, at which it claims...

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Pharmaceuticals & Healthcare

Romania Pharmaceuticals & Healthcare

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BMI View:   Sales data ha ve provided support to our earlier view that Romania's pharmaceutical market recovery would be consumer - driven. The underlying dynamics have been driven by improvements in the consumer outlook and the country's macroeconomic prospects, in line with the views of our Country Risk team. Provided unemployment continues to pare down and economic growth continues, the pharmaceutical market will continue on its current growth trajectory.

Headline Expenditure Projections

  • Pharmaceuticals: RON13.96bn (USD4.17bn) in 2013 to RON14.65bn (USD4.38bn) in 2014; +5.0% in local currency terms and 5.0% in US dollar terms. US dollar forecast revised...

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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

  • The market potential for the retail of electricity is continuing to improve. In July 2014, the German RWE Group announced plans to expand its retail activities to Romania. This follows the...

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Real Estate

Romania Real Estate

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BMI View: Romania's commercial real estate sector is benefitting from the country's strong economic recovery with real GDP forecast to grow by 3.2 % in 2014 and 3.7 in 2015 , according to our Country Risk team's latest macroeconomic outlook. A growing sense of optimism is pervading many areas of the sector as both tenant demand and investor interest begin to trend upwards.

With a focus on the principal cities of Bucharest, Brasov and Cluj-Napoca, the report covers the rental market performance in terms of rates and yields across the office, retail and industrial segments of the commercial real estate market.

The recovery in the sector continues to be driven in large part by that of the retail sector, with...

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Retail

Romania Retail

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BMI View : The Romanian retail market is forecast to struggle through 2014 and BMI projects a 3.4% decline in total retail spending during 2014. BMI forecasts that this reduced growth will remain through the 2015 period where we forecasts a relatively contestant level of spending in retail with the total spending in retail forecast to remain a consistent USD108nn in both 2014 and 2015. Despite these early struggles, BMI forecasts that the Romanian retail market will rebound into growth and by 2016 we forecast an annual increase in retail spending of 2.76% with total spend in retail increasing to USD110bn. The end of the projection period represents the greatest area of opportunity with BMI forecasting annual growth in retail spending of 5.98% and 6.34% in 2017 and 2018, respectively. By the end of the Projection period...

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Shipping

Romania Shipping

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Romania's main port of Constantza is forecast to see steady growth both in terms of both total tonnage and container throughput in 2014 in line with the country's continued economic recovery and eurozone's projected return to growth.

Robust exports and recovering private consumption will support freight volumes at the country's ports.

Over the medium term, we project 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 level.

Headline Industry Data

  • 2014 port of Constantza tonnage throughput forecast to grow 8%, over the medium term we project a 28% increase.

  • 2014 port of Constantza container throughput forecast to grow 3%, over the medium term we project a 23% increase.

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Telecommunications

Romania Telecommunications

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BMI View: The Romanian telecoms market is relatively low value in per capita terms due to low income levels in a regional context . Despite this it is home to a developed market with internationally backed operators, mobile virtual network operators , and competition in higher value wireless data services - with all three mobile network operators having launched LTE services as of May 2013. There is medium term downside for operators as price competition , cuts to MTRs and economic challenges could all contribute to the deterioration of operator financial performance ....

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Tourism

Romania Tourism

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BMI View: We expect to see steady growth across most key industry indicators for this fledgling tourism market in the coming years. BMI predicts a growth in inbound and outbound tourism as well as tourism receipts, though the hotel and restaurant industry is likely to display more volatility in the period up until 2018. Despite some reservations concerning infrastructure and a bloated bureaucracy, we believe this market has some great opportunities for expansion.

Romania is almost completely dependent on European countries as its tourism industry's source markets. In the coming years, if predictions of a sustained period of European economic growth hold true, this will lead to a healthy growth in visitor numbers to Romania, around 5% per year until 2018. Naturally, this dependence on Europe for visitors also poses a risk of...

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Water

Romania Water

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BMI View: Although much work is still needed within the Romanian water sector, especially in terms of basic repairs, modernisation and expansion of infrastructure, the sector has received significant investment in recent years and the sector is improving . Water quality, sanitation and distribution have all been improved in an effort to bring the sector in line with EU regulations. Despite a predicted fall in population, our forecast for the period up to 2018 is a rise in water extraction and consumption as well as an increase in the amount of untreated water discharge. Recent flooding will highlight the need for improved flood defences and the cost of repairing the flood damage may divert funding away from improvements to basic water infrastructure....

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