There was no big change in the sentiment of FIC members since March 2019. Roughly half of respondents expect their revenues to grow next year and almost one third expect them to remain similar to this year.
FIC members’ trust in the legislative environment remains low following the debacle of Emergency Ordinance 114/2018 but it has not further deteriorated. Romania continues to score poorly on infrastructure and regulatory burden. Investors have no option but to adapt to the “new normal”, that is a situation of constant lack of predictability where anything might happen at any time. Studies have shown that this lack of predictability have a significant impact on investments, albeit one difficult to quantify.
The most worrying indicator right now and is the availability of adequate workforce. Two-thirds of respondents say they are unable to find adequate workforce. This is the first time when more than half of the respondents of the FIC sentiment index reported facing this problem.
The survey shows a decrease in members who are anticipating growth in their export markets which is consistent with the slowing down of the German and other European economies, Romania’s main trading partners.
One third of members will increase their capital spending next year and plan to hire more, and 40% will keep investment and hiring to similar levels as this year.
The negative scores on infrastructure, bureaucracy and regulatory burden remain unchanged.
“Looking at the results and trends of the sentiment index we believe the authorities and political parties need to work in a couple of important directions in the following period. First and foremost, they must strive to restore trust in the Romanian legislative environment,” FIC said.
Secondly, the situation in the labor markets has to be addressed with an eye for the future, it added.
Businesses will adapt to a tighter labor market or one where there is an increasing lack of certain skills because they have no alternative. However, the authorities need to pay attention that the general wage level does not outpace the general productivity level of the economy as this will harm the competitiveness of the economy in the long run.
The focus of policy should not be on keeping wages low but on improving the overall productivity of the Romanian economy. This can be done by investments in education and infrastructure but also by upgrading the kind of public services that will increase the quality of life and stop the brain drain to other countries, the council said.
Forty-six of the 125 FIC members replied to the September 2019 Business Sentiment Index Survey.