“Romania is steadily losing its low-cost advantage in favor of less developed countries in South America, Africa or Asia. The move, annulling one of the most important foreign investments in Romania over the past several years (Nokia was the second largest exporter in Romania in 2010), was warning enough for the country’s government,” Deloitte said in a report.
“As the country is facing fierce, intensifying global competition, it must balance the risk of losing investments with the benefits of gaining new ones,” reads the report.
According to Deloitte, new construction projects, infrastructure works and agriculture development, supported by a better absorption of European structural funds are the solutions that may counter the impact of the closedown of Nokia’s local plant.
The Romanian business environment still has “some cards to play” if it invests in innovation and differentiation, said Deloitte.
Romanian executives show increased trust in the stabilization of the economy, while investors are turning their backs on the West due to fears regarding the coming back of recession in developed countries. They look for opportunities on emergent markets, which are less vulnerable, according to a survey conducted by Deloitte.
“News about new investment plans in the country is piling up. With an IMF stand-by agreement disciplining governmental policies and two consecutive quarterly hikes in GDP this year, Romania seems, at least on paper, to be recession-free and less risky,” reads the report.
Romanian executives’ expectations regarding revenue increases are more optimistic. The number of company managers that said they will lay off employees decreased, according to the survey.
On the other hand, the number of managers that said credit is currently hard to get has increased.
According to the latest edition of the Business Sentiment Index released by Deloitte, 55% of Romanian executives expect the economy’s prospects to stay the same in the next six months (up from 48% in the index released in June 2011) while 7% expect a significant improvement (from 0% in June).
“Traditionally, Romania’s economic growth has been closely linked to foreign direct investment. After steady drops in interest over the past years, new investment plans, together with a revival of local consumption and increase in exports, are extremely good news. Retail/trade, energy and resources, and manufacturing, the key industries represented by the executives in this survey, are among the industries with the highest potential in the months to come,” said Deloitte.
Executives show growing confidence in the economy and consumption, as 59% expect improved sales figures over the following twelve months. The percentage of executives budgeting lower sales for their firms has dropped to 3% from 16% in June 2011.
According to the survey, 72% of executives estimated that headcount at their firms will remain the same over the next year, and 3% of them said they might employ new staff. Also, 3% of managers expect they might have to lay off employees in the next twelve moths.