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 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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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 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 EUR 3.9bn 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 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 :  Whilst we anticipate modest growth in total premiums written towards the latter part of our forecast period in US dollar terms,   the overall outlook for the profitability of the sector remains bleak. On a brighter note, Romania has the largest presence in the SEE (South East Europe ) top 100 insurers with 21 entrants, the highest being Astra SA ranked at number 6.

None of the trends that are evident in the non-life segment, which dominates Romania's insurance sector, are positive. As a consequence of cut-throat competition, prices in the unprofitable motor related sector continue to fall. Several of the market players, sensibly, are trying to refocus their business on non-motor lines. However, in a patchy economy, volumes and prices are...

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Medical Devices

Romania Medical Devices

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BMI   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   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 e xploration 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 2012-2018)
  ...

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Petrochemicals

Romania Petrochemicals

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The Romanian petrochemicals market is set for strong growth as end-use markets, particularly the automotive sector, report strong growth. But BMI's latest Romania Petrochemicals warns that local producers will struggle to fulfil demand, particularly with troubled local PVC producer Oltchim operating well below operational capacity. As such, the country will witness rising petrochemicals imports at least over the short term.

The petrochemicals sector remains in a strong position, but growth is now moderating in line with an overall slowdown in export markets. In the first seven months of 2014, chemicals output grew 3.0% and rubber and plastic grew 8.2%, compared to the industrial average of 8.8%. This follows 11.7% growth in rubber and plastic and 12.5% growth in chemicals in 2013. Further growth could be expected if Oltchim is brought back into full operation, although this depends in its...

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Pharmaceuticals & Healthcare

Romania Pharmaceuticals & Healthcare

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News: Argentina registered the biggest two-day loss in its bonds since 2012 as the International Swaps & Derivatives  Association(ISDA)'s determinations committee ruled that the country's failure to pay interest will trigger credit default swaps of USD1bn. The ruling was issued by the committee after the government failed to meet a payment deadline on July 30 on USD539mn of notes. However, the country has declined the allegation and stated that it has already made the payment to the bond's trustee (Bloomberg).

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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

  • Romania's production of electricity is growing rapidly, by 9% year on year during the first eight months of 2014. This is a result of heavy rainfall in spring, but also continued investment in...

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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 ' s retail market saw strong growth in 2014 as total household spending registered an forecast 5.2% increase. However, BMI anticipates that the spending will decline by approximately 2.0% in 2015 and will not start rebounding by the end of the year. Romania ' s economy is struggling to grow as a result of pessimism demonstrated by both consumers and retailers. The construction sector and foreign direct investment are slowing down and the government is facing challenges to consolidate the budget, which will resonate in the household spending. Despite this, several retail chains are planning expansion in Romania in 2015,...

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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 in terms of both total tonnage and container throughput in 2015 in line with the country's and the eurozone's projected economic recovery.

Still 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 to 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 5.4%, over the medium-term we project a 24.0% increase.

  • 2015 port of Constantza container throughput forecast to grow 3.8%, over the medium-term we project a 26.9% increase.

    ...

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Telecommunications

Romania Telecommunications

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BMI View: Despite having one of the lowest mobile market penetrations in the region, Romanian market sustained significant losses 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. However, as GDP per capita will rebound as of 2015, Romanian telecommunications sector will recover in lock-step. 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 between pay-TV operators.

Key Data

  • According to the latest data...

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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 tens ions 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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