Over 70% of respondents in the latest March 2024 survey conducted by the Foreign Investors Council (FIC) – Business Sentiment Index (BSI) identify legislative ambiguities and uncertainties as the primary challenge in the business environment. In recent years, businesses have navigated through crises, adapting to challenges like the pandemic, inflation, energy costs, geopolitical shifts, and supply chain disruptions. Moreover, fiscal measures implemented last year notably worsened investors’ perception of Romania.
Yet, the spring 2024 BSI edition reflects a moderately optimistic improvement in investors’ perception of Romania’s economic environment. This shift follows government announcements regarding the temporary limitation of the new turnover tax, assurances of no new taxes in 2024, and commitments to collaborate transparently with the private sector on tax reform principles.
Despite facing challenges, FIC members demonstrate a steadfast commitment to Romania, as evidenced by their investment appetite. Forty-two percent of companies are increasing capital for future investments, while 40% plan to maintain current investment levels. Sixty percent of respondents anticipate positive business growth next year, with over half expecting revenue increases in the next 12 months. However, investors exercise caution regarding costs, with close to 60% not planning to hire new employees and 67% considering spending reductions in the upcoming period.
In terms of competitiveness, investors perceive Romania as lacking transparency and consistency in policy application (64%), burdened by fiscal regulations (57%), regulatory complexities (51%), and infrastructure deficiencies (42%). However, the appeal of Romanian projects relative to peer countries has increased since the previous BSI, with 53% finding them attractive compared to 34% in October 2023. Nonetheless, over one-third (35%) of respondents still view Romania as less attractive than comparable locations.
Considering that 2024 marks an election year for numerous countries, including Romania, about 70% of respondents anticipate that the elections will impact their businesses. Common concerns revolve around potential shifts in government policies and legislation, particularly regarding fiscal and tax matters. Investors emphasize the importance of Romania maintaining a strategic approach to sustain the state budget, advocating for prudence in public service administration spending. Simultaneously, investors identify key opportunities for Romania, including attracting new investments, advancing digital transformation, and fostering new energy initiatives.
FIC members underscore the critical need for Romania to establish a dependable and consistent legal framework, develop medium to long-term strategies with realistic timelines, and conduct comprehensive impact assessments. They also highlight the importance of engaging in dialogue with the private sector to chart strategic directions crucial for the nation’s economic growth.
Moreover, Romania can enhance its global standing through OECD membership, which could attract high-value foreign direct investment and alleviate pressure on the state budget deficit. For many companies, OECD membership is a prerequisite for investment, signifying adherence to rigorous economic and legislative standards. Therefore, Romania must adopt a more cohesive and strategic approach to foreign direct investments (FDIs).
The detailed FIC Business Sentiment Index, this year’s spring edition, can be found here.
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