Romania – a Strategic Choice Manuel Costescu – State Secretary, Investromania
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Romania – A Strategic Choice Manuel Costescu – State Secretary, InvestRomania 2016, Bucharest Contents 1. Country overview 2. Macroeconomic overview and outlook 3. Doing business in Romania 3.1 Cost of doing business 3.2 Human Capital 3.3 Government support 4. Life in Romania and key takeaways 2016 The Government of Romania 2 1. Country overview 1 Romania is one of the most promissing investment destinations in Europe, boasting features that set it apart as a growth opportunity Economic growth in Romania is among the EUR highest in the EU and is forecast to remain above BN 3 Area: 238,391 potential in 2016 and 2017 NET FDI INFLOW km2 Romania has been a member of EU since 2007 EUR Capital: and a member of NATO since 2004 BN 160 Bucharest NOMINAL GDP st Romania is ranked 1 in the EU for maximum EUR Currency: LEU (RON) speed of internet connectivity and 2nd for high BN 55 speed broadband adoption EXPORTS Population: 19,5 mn ppl In 2021, Romania will host the European Capital S & P Moody’s Fitch of Culture for the second time, after Sibiu in 2007. BBB- Baa3- BBB- Baia Mare, Bucharest, Cluj and Timisoara have Stable Positive Stable S-E Europe been shortlisted for this role 2016 The Government of Romania Source: InvestRomania 4 1 The country is in the transition 2-3 stage of development with regards to the Global Competitiveness Index 2015 – 2016 Romania – Global Competitiveness Index 2015-2016 2016 The Government of Romania Source: World Economic Forum - The Global Competitiveness Report 2015-2016 5 1 Romania is now more connected than ever, boasting a transport network of 14 international & domestic airports and 8 major ports SUCEAVA SATU MARE BAIA MARE IASI ORADEA BACAU CLUJ-NAPOCA TARGU MURES GALATI ARAD BRASOV SULINA SIBIU BRAILA TULCEA TIMISOARA M. KOGALNICEANU CONSTANTA International Fligths BUCURESTI OTOPENI Domestic Fligths DROBETA TR. SEVERIN Under construction CRAIOVA MANGALIA GIURGIU Ports 2016 The Government of Romania Source: InvestRomania 6 1 130 direct flights can be accessed from 4 Romanian international airports, leading to 76 destinations in 31 countries worldwide Barcelona Eindhoven Paris Barcelona Munich Bari Geneva Rome Bologna Paris Basel London Tel Aviv-Yafo Brussels Rome Bologna Madrid Valencia Bucharest Tel Aviv-Yafo Brussels Malmö Venice IASI Istanbul Turin Bucharest Memmingen Vienna 14 direct flights London Venice Cologne Milan Warsaw Milan Vienna Dortmund Munich Zaragoza CLUJ-NAPOCA Dubai Nuremberg 26 direct flights BUCURESTI OTOPENI TIMISOARA 73 direct flights 17 direct flights Barcelona Madrid Bari Memmingen Bologna Milan Brussels Munich Bucharest Paris Alghero Belgrade Copenhagen Frankfurt Madrid Nuremberg Satu Mare Timisoara Dortmund Rome Alicante Berlin Doha Geneva Málaga Oradea Sibiu Turin Eindhoven Valencia Amman Birmingham Doncaster Glasgow Malmö Oslo Sofia Valencia Frankfurt Venice Amsterdam Bologna Dortmund Hamburg Malta Paris Stockholm Venice London Athens Brussels Dubai Iași Milan Perugia Strasbourg Verona Barcelona Budapest Dublin Istanbul Moscow Pescara Stuttgart Vienna Bari Catani Düsseldorf Larnaca Munich Pisa Suceava Warsaw Basel Chisinau Eindhoven Liverpool Naples Prague Tel Aviv Zaragoza Beirut Cluj-Napoca Florence London Nice Rome Thessaloniki Zürich 2016 The Government of Romania Source: InvestRomania 7 1 70 industrial parks are spread across Romania, most offering capabilities suited for industries like aerospace, IT&C and industry Industrial parks in Romania Status at regional level 1 1 North West Region: 15 parks 1 1 1 West Region: 4 parks 3 1 9 South West Region: 6 parks 1 1 1 2 South Region: 22 parks 3 2 1 9 1 South East Region: 2 parks 1 North East Region: 4 parks 2 1 13 5 Center: 15 parks 1 2 1 Bucharest: 2 parks 2 2 1 • There are 70 industrial parks spread across Romania, placed under both private and public ownership • All offer access to utilities, particular benefits packages according to their focus and potential for synergies • Also, investors are exempted from land, building and urban planning taxes as well as for land destination changing 2016 The Government of Romania Source: InvestRomania 8 1 Technology is becoming a significant part of Romania’s backbone infrastructure, being leveraged by a talented pool of developers Top 10 EMEA countries by avg. speed [Q2 2015, Mbps] Top 10 EMEA countries by top speed [Q2 2015, Mbps] 16.1 15.6 15.2 72.1 71.4 14.3 14.0 13.9 12.9 12.8 62.8 60.9 59.4 12.4 12.1 57.3 54.2 53.2 51.7 50.9 SE CH NL NO FI CZ DK RO BE IL RO IL SE NL CH BE RU FI HU UK Top 10 EMEA countries by Mbps Broadband adoption [Q2 2015, % > 4 Mbps] 95.0 95.0 94.0 93.0 93.0 92.0 91.0 90.0 90.0 88.0 31.0 60.0 47.0 57.0 49.0 60.0 53.0 53.0 48.0 35.0 59.0 53.0 35.0 48.0 37.0 44.0 33.0 39.0 38.0 42.0 NL IL RO DK CH SE BE AU FI HU Share above 10 Mbps Share between 4 - 10 Mbps • The internet infrastructure has developed along with the developers, who are leveraging the network to offer high quality outsourcing services, although the focus is now shifting towards product design and, consequently, startups 2016 The Government of Romania Source: Akamai Technologies; InvestRomania 9 2. Macroeconomic overview & outlook 2 Current macroeconomic outlook is stable, with positive evolutions expected by some credit rating agencies Potential and real GDP evolution [%] The output gap is projected to close 7 in the 2nd half of 2016 6 5 6 4 0 0 -2 -2 -1 -4 -3 -4 -5 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 • Romania is under European Commission surveillance mechanism through Macroeconomic Imbalances Procedure • Currently, Romania respects all of MIP indicators suggesting a strong position in terms of macroeconomic policies • Credit rating agencies: – Moody’s: Updating Romania's Baa3 government ratings from stable to positive (Dec 2015) – Fitch: Outlook is stable with long-term foreign and local currency IDR at “BBB-” and “BBB” (Jan 2016) – S&P: Outlook is stable, rating of “BBB-”(Oct 2015) 2016 The Government of Romania Source: AMECO database, European Commission; InvestRomania 11 2 Real GDP growth rate was 3.8% in Q4 of 2015, one of the highest in EU 28, with forecasts maintaining a positive outlook Real GDP growth [%] 3.8 4 3.5 3.6 3 3.1 2.6 2.7 2.1 1.8 1.9 1.5 1.2 1.2 1.3 1.3 1.3 0.9 1 1.1 -0.2 -1.9 • Growth rate is expected to remain high, close to current potential (4%) • Current forecasts estimate growth at 4.2% in 2016 and 3.7% in 2017 according European Commission Forecasts for Romania 2016 The Government of Romania Source: AMECO database, European Commission; InvestRomania 12 2 Nominal GDP grew by a total 275% between 2000 and 2014, while FDI stock grew by 971% for the same interval Evolution of nominal GDP in Romania 2000 – 2014 [EURbn] +10% 142 144 150 125 120 127 133 134 80 98 41 46 49 53 61 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Nominal GDP Evolution of FDI stock in Romania 2000 – 2014 [USDbn] +18% 76 83 75 62 65 70 68 70 45 20 25 7 8 8 12 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 FDI stock CAGR 2016 The Government of Romania Source: Eurostat; UNCTAD; InvestRomania 13 2 Romania experienced a recovery of internal demand amid a pro- growth fiscal policy boosting private consumption and investment GDP growth by aggregate demand components [%] 6.86 Forecasts 8.36 8.06 4.17 8.46 5.59 5.52 5.18 2.40 3.53 4.20 2.96 3.60 3.69 1.06 0.64 -0.80 -7.07 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Inventories GFCF Net exports Public consumption Private consumption • Domestic demand is set to remain the driver of growth in 2016 and 2017. Private consumption recovered to its post-2008 peak on the back of higher household disposable income and negative inflation • Net exports' contribution to growth is projected to remain negative over the next years, as imports growth in line with surging domestic demand outpaces exports growth 2016 The Government of Romania Source: AMECO database, European Commission; InvestRomania 14 2 Public finances remains solid despite the effects of the financial crisis and the push of external challenges ESA fiscal balance, Romania [% GDP] • Fiscal deficit decreased constantly 2011 2012 2013 2014 2015 2016 2017 2018 during 2011 – 2015 amid a strong fiscal consolidation process • Starting 2016 it is expected to -1.4 -1.2 increase to 2,8-2,9% of GDP, mainly -2.2 -2.3 due to fiscal measures taken -2.95 -2.89 -3.2 recently to stimulate economic growth (standard VAT rate reduction, SSC reduction in 2014, state aid Forecasts -5.4 schemes and public investment). Public debt [2015, Q] • However, Romania stays in the limits imposed by Maastricht Treaty 200 regarding both fiscal deficit and 150 public debt. EU28 average: 86% of GDP 100 • Romania has one of the lower public 50 debt in EU 28 at the end of Q3 2015: 0 37,2% of GDP, after Estonia (9,8%), Italy Malta Spain Latvia Luxembourg (21,3%), Bulgaria Ireland Poland Austria France Cyprus Croatia Finland Greece Estonia Sweden Belgium Bulgaria Portugal Slovakia Hungary Slovenia Romania Lithuania Denmark Germany (26,9%) and Latvia (36,4%).