Moderate optimism is the perception of the business environment in Romania

The main challenge faced by the business environment is represented by legislative ambiguities and uncertainties, according to more than 70% of the respondents of the latest edition, from March 2024, of the survey conducted by the Foreign Investors Council (FIC) – Business Sentiment Index (BSI). The business environment has faced various crises in recent years and has had to continuously adapt and identify solutions to challenges related to the pandemic, inflation, energy and utility prices, geopolitical context, supply chain issues, etc. In addition to these challenges, the package of fiscal measures adopted last year led to a significant deterioration of investors’ perception of Romania.

The spring 2024 edition of the BSI nevertheless captures an improvement in investors’ perception, moderately-optimistic, on the economic environment in Romania as a result of the Government’s messages regarding the limitation for a determined period of the new turnover tax, the assurance that in the year 2024 no new taxes will be introduced, and also that the authorities will work closely and transparently with the private sector to set the principles of tax reform.

Although there are some challenges, the long-term commitment of FIC members to Romania is illustrated by the appetite for investments, 42% of companies have increased the capital for investments for the next period, and 40% will keep the investment level constant compared to the last 12 months. In terms of perception of business growth expectations, 60% of respondents forecast a positive development for next year. At the same time, more than half of respondents expect revenue growth over the next 12 months. However, the investors are more cautious with the cost, close to 60% of the respondents do not plan to hire new employees and 67% are considering spendings reduction in the following period.

When it comes to the competitiveness of Romania, investors consider Romania to be uncompetitive in terms of transparency and consistency of application of policies (64%), fiscal burden (57%), regulatory burdens (51%), and infrastructure (42%). However, the attractiveness of the Romanian projects compared to peer countries has risen since the last BSI (53% compared to 34% in October 2023), although more than one-third (35%) of the respondents consider Romania less attractive than peer locations.

Having in mind that 2024 is an election year for many countries around the world including Romania, around 70% of the respondents believe the elections will affect their business and there are common threads that pertain to potential changes in government policy and legislation, with an emphasis on fiscal and tax issues. Investors highlight that is important that Romania keeps a strategic approach for the sustainability of the state budget having a cautious approach regarding public service administration expenditure. At the same time, investors pointed out the main opportunities which Romania can benefit from: attracting new investment, digital transformation, and new energy projects.

FIC members emphasize the vital importance of Romania establishing a reliable and consistent legal environment, development of medium to long-term strategies with feasible timelines for execution, and the conducting of thorough impact assessments and analyses. They also stress the value of engaging in dialogue with the private sector on strategic directions as vital for the nation’s economic development.

Romania can reach international recognition that comes together with the OECD membership, in particular the possibility of attracting added value foreign direct investment that would decrease the pressure of the state budget deficit. For some companies, OECD membership is one of the necessary conditions for investing in each country, representing a guarantee for high economic and legislative standards, therefore a more coherent and strategic approach is needed from Romania in terms of FDIs.