AHK Business Outlook for Romania: German companies expect a slowdown in the economy and are pessimistic about the future

The economic situation of companies with German capital in Romania has deteriorated this autumn, and most of them are also pessimistic about the future, according to the results of a survey carried out by the Romanian-German Chamber of Commerce and Industry (AHK Romania) in October 2023 The main reasons are the uncertainty caused by geopolitical risks and the decrease in demand against the background of high inflation rates and interest levels, but also the lack of qualified personnel and the evolution of labor costs are reasons for concern for many companies. The survey assesses both the economic situation and the business situation of the companies and provides an overview of the most important economic risk factors from the perspective of the companies. The decisive factors in making an investment decision are also listed.

Only 17.1% of surveyed companies expect Romania’s economic situation to improve over the next 12 months, compared to 22% in the spring, while 38% believe it will remain unchanged. The majority (44.7%) believe that the economic situation will deteriorate (spring 2023: 26%). Regarding the evolution of their own company’s activity, the majority (46.1%) believe that it will remain unchanged, while 17.7% expect their activity to deteriorate in the coming months (spring 2023: 15.9%). The number of those who expect the situation of their own businesses to improve has decreased: only 34.2% (spring 2023: 46.2%) of companies remain optimistic.

All this has led to a reduction in investment plans and the intention to make new hires has fallen. More than 30% of respondents say they will reduce investments (spring: 24.4%). Thus, the volume of investments remains unchanged for 38.2%, while 6.6% of the surveyed companies do not plan any investment for the next 12 months. Only a quarter of respondents still intend to increase investment locally (spring 2023: 39.7%). It is also important to see in which areas German companies in Romania make significant investments and which are the factors that play a decisive role in this regard. Most (47.7%) of those considering investing plan to invest in production and manufacturing, as well as sales and marketing. Research and development activities are also considered by 22.3% of respondents. Market size and proximity to customers are the most important factors influencing the investment decision. Romania, with its 19 million inhabitants, membership of the EU family and proximity to Western Europe, remains a good option for German investors. The number of employees remains constant in most companies (autumn 2023: 57.3%, spring 2023: 42.4%), but the number of companies willing to make new hires decreases significantly (autumn: 26.7%, spring: 41, 7%).

Companies with German capital in Romania believe that the low demand for products and services (63%) and the lack of qualified personnel (61%) are the biggest risks, but also labor costs (51%) and the conditions-political framework- economic (43%) also cause concern among respondents. In addition to the answer options, companies had the opportunity to indicate other factors that play a decisive role for local investments. They cited the lack of predictability due to frequent legislative changes, such as changes to the tax code, the international economic and geopolitical situation, and demand from their customers, which fell sharply. “Despite all the challenges and risks, the prospects for German companies in Romania and for bilateral economic relations are good, and I believe that Romania will continue to attract new investments. But, as the results of this survey show once again, for this we need an economic environment favorable to business, competitive and, above all, predictable”, declares Sebastian Metz, general director of AHK Romania.

The results of the global survey, coordinated by the German Chamber of Commerce and Industry (DIHK), of more than 3,600 German companies operating abroad and companies with close ties to Germany show that there is no sign of recovery strong worldwide as the global economy cut engines during the year. As a result, German companies are less optimistic about the economic development in the investment locations where they operate internationally in autumn 2023 than they were in spring. In Europe, expectations regarding economic developments are negative and have worsened significantly in some cases compared to the previous survey. At 46%, low demand is currently rated as the biggest risk to business worldwide, followed by economic policies (42%) and the lack of skilled staff (37%). “Decreasing demand from China and geopolitical risks are having a negative impact on the business of globally active German companies,” says Volker Treier, head of DIHK’s foreign trade department. The full results of the AHK World Business Outlook, conducted globally, can be consulted here (in English).

The “AHK World Business Outlook” survey was conducted between September 25 and October 20, 2023. The conflict in the Middle East, which broke out on October 7, did not have a significant impact on companies’ expectations during the survey period. 76 Romanian companies participated, of which more than half (54%) are active in industry and construction, 30% in the service sector and 16% are commercial companies.