2017 presents a set of challenges because of the uncertainty of the new Trump administration, a set of elections in key EU nations, and the ongoing sage of Brexit, to name but three of the obvious influences on investor perceptions. Add to these factors the greater than normal uncertainty on the international stage, and we can expect investors to be especially vigilant in gauging risks. Happily, Romania remains a stable, attractive investment environment.
Nonetheless, Romania’s unique combination of advantages has placed it firmly on the radar of investors. Improving economic conditions and a high degree of monetary stability have led to significant transactions and a welter of opportunities. Due to its favourable geographical position at the intersection of major European trade corridors, Romania has long been recognised as an excellent investment destination for companies who wish to establish themselves on the local market and to build stronger ties with Asian and Middle Eastern partners. Conversely, it is also attractive for Asian and Middle Eastern partners with business interests in Europe. With the highest GDP growth in the EU in 2016 estimated at 4.8%, forecasters expect Romania to retain this position in 2017.
Further stability is provided by the reduction in Romania’s budget deficit and current account deficit, reaching a competitive debt-to-GDP level below countries such as Poland and the Czech Republic.
Investor interest in Romania has also been triggered by substantial levels of EU funding and foreign direct investments combined with a notable growth in exports.
Credit growth was also facilitated by a considerable decrease in the amount of non-performing loans over total loans (NPL ratio), with Romania’s banks considered by the World Bank to be in a good position to enable further loan growth.
The GDP growth is also sustained by a highly-educated, multilingual and comparatively inexpensive labour force.
One of the most successful sectors is IT&C which has grown thanks to a favourable low tax system and one of the largest IT workforces in Europe.
Another strong sector is car manufacturing, and significant growth is forecast for the agricultural sector.
Another reason that makes Romania a top choice for investors is its improving competitiveness. According to the World Economic Forum Global Competitiveness Report, Romania has moved up six places in the overall ranking since last year. Considerable benefits are also generated by one of the lowest rates of EU corporate and personal income tax rates that are at only 16 per cent.
From a legal standpoint, consolidated fiscal legislation has been reinforced, although a certain level of fiscal risk is still on the radar.
Important reforms to public procurement laws were adopted in 2016 with results already in progress in early 2017. Existing issues with the legal framework have been tackled, and significant improvements have been made to facilitate the construction of extensive infrastructure projects for the development of highways, airports, railways, and other connections between larger Romanian cities. In terms of efficiency increase and EU absorption rate, the new legal framework includes provisions aimed at greater transparency and reduced timescales in the award procedure through the introduction of technology. Starting with Q4 in 2016, a significant number of projects, including for modernization of highways, railways, and gas pipelines have been started. Many more are included on the lists of upcoming projects.
At a structural and administrative level, the fight against corruption has been a top priority and was praised by the European Commission in 2016 for the the efforts made.
In summary, the main advantages offered by Romania are:
Referred to as the “Eastern European tiger,” Romania’s evolution in the past few years is defined by macroeconomic stability, more predictability in the business environment, and improvements in government processes and developments that facilitate foreign investment. Combined with a cost-efficient and capable workforce, it is an attractive place for investment and development.
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