Doing Business in Romania
A marketplace of 21 million, 37 million acres of arable land, breathtaking landscapes, an expanding economy, a well-educated workforce with more than 50,000 specialists in information technology, access to the Black Sea and Asia. These features of Romania have attracted U.S. investors in banking, energy,
biotechnology, manufacturing, electronic components, cable operation, consumer products, telecommunications and film production, among others. They have discovered that American management and capital works profitably in Romania. U.S. exports in Romania are growing as well, fueled by Romania’s economic expansion and new reductions in trade barriers.
Romania offers significant opportunities to American businesses with products, services, or technologies that either meet growing private demand or contribute to the country’s development priorities. The country’s entry into the European Union in January 2007 was preceded by a series of government reforms in order to satisfy the conditions of EU membership. Now the requirements of membership – including EU directives – make up one of the driving forces in Romania’s program of reform, modernization and investment in infrastructure. More significantly, these directives are accompanied by funding from the EU in the form of Structural Adjustment Funds and other programs to enable the new members to align their economies with the rest of the EU.
Romania is a market with excellent potential, a strategic location, and an increasingly solid business climate. While careful evaluation of the market is needed in order to seize business opportunities, exporting to or investing in Romania is gradually becoming less challenging than in previous years in terms of the predictability of the business environment.
Following a 3.4% growth in real GDP in 2013 and 2.8% in 2014, largely driven by record harvests, Romania is well on track to another year of 3% GDP growth as it registers one of the best performances in the European Union. The first quarter of 2015 registered 1.6% quarter-on-quarter and 4.3% year-on-year GDP growth, indicating one of the fastest growth rates since the 2009 recession, with private consumption and investment as the main drivers of growth (the fastest growth rate, 5.2%, was in the last quarter of 2013). In addition, the Ministry of Finance reported a consolidated budget surplus of approximately $1.2bn (equivalent to 0.7% of projected annual GDP) for the first quarter of 2015, as a result of increased revenue from VAT, income taxes and EU payments. Nevertheless, year-on-year growth will not reach its fullest potential unless issues of poor infrastructure and structural reforms, at least in the transport and energy sectors, are solved.
For the near future, the economic picture will remain largely the same. Romania’s convergence program for 2015-2018 (sent to the European Commission in April 2015) predicts steady economic growth. Nevertheless, the fiscal environment in Romania has been rather unpredictable in recent years and changes to the Fiscal Code often occurred without notice or consultations with the business community. A rewritten version of the Fiscal Code is currently being considered by Parliament and the President and should enter into force on January 1, 2016.
In the context of historically low inflation (expected to be negative in 2015, the first time since the fall of Communism), a structural fiscal position of approximately 1% of GDP, and a current account deficit below 1% of GDP, the National Bank of Romania relaxed monetary policy in order to support the economy starting with the Financial Crisis in 2008. There were gradual interest rate cuts from 10.25% at the beginning of 2009 to a record low of 1.75% at present. The Romanian currency has been one of the most stable in the region for the last two to three years. Public debt is currently below 40% of GDP and is predicted to decrease in the medium-term, provided that the fiscal consolidation process and economic growth maintain their pace. While Romania is increasingly attractive for trade and investment, a coherent tax policy, liberalization of the energy supply, and reform of the education and healthcare systems are needed to register further progress in the next period and improve Romania’s business outlook.
Romania will be eligible to receive approximately €43 billion in Structural and Cohesion funds and Rural Development and Fisheries funds from the EU in the 2014-2020 programming period (according to the Partnership Agreement for Romania). Lessons learned from the 2007-2013 programming period could lead to an improved fund absorption rate in the coming period.
Bilateral trade between Romania and the United States reached record levels of over $3 billion in 2014 (up roughly 25% from 2013), with $2.1 billion in Romanian exports to the United States (up 23%) and just under $1 billion in Romanian imports from the United States (up 31%). 2015 trade statistics thus far (through April 2015) show a slight increase trade, with a 3% increase in imports from the United States and a 1% increase in exports to the United States.
Recognize these names?
Your competitors are in Romania or will be soon…
3M, AIG, Alcoa, Amway, Avon, Bunge, Cargill, Cisco, Citibank, Coca-Cola, Colgate Palmolive, Ernest & Young, Delphi, General Electric, HBO, Honeywell Garret, Howard Johnson’s, HP, IBM, Johnson Controls, Kodak, Kraft, Lockheed Martin, McDonald’s, Microsoft, Motorola, New Century Holdings, Oracle, Philip Morris, Proctor and Gamble, Qualcomm, RAEF, Solectron, Timken, UPS, Visa, Washington Group, Xerox...to name a few!
Can your company afford to miss out on this important opportunity?
Romanian Country Commercial Guide
The Country Commercial Guide (CCG) presents a comprehensive look at Romania's commercial environment using economic, political, and market analysis. The CCGs were established by recommendation of the Trade Promotion Coordinating Committee (TPCC), a multi agency task force, to consolidate various reporting documents prepared for the U.S. business community. Country Commercial Guides are prepared annually at American Embassies through the combined efforts of several U.S. government agencies.
Romania Country Commercial Guide 2015