The Spring 2021 Economic Forecast by the European Commission presents an improvement in growth prospects compared to last winter forecast presented by the Commission in February. For Romania, the growth forecast of the economy was adjusted to 5.1% for 2021 and 4.9% for 2022, compared to the winter forecast which indicated an increase of 3.8% and 4%, respectively.
The economies of all Member States are expected to return to pre-crisis levels by the end of 2022, as vaccination of the population progresses and a gradual rise of the social distancing measures will become more feasible. The gradual introduction of projects under the Recovery and Resilience Programs contributes to boosting investment growth.
Similarly, the results of the FIC Business Sentiment Index (BSI) indicator for March 2021 capture the investor’s generally optimistic perception regarding the Romanian business environment, after more than a year from the outbreak of the pandemic, compared to the previous iteration (autumn 2020), when the health crisis was perceived as reaching a new peak.
According to FIC members, there is a feeling of moderate optimism about the direction in which their businesses will grow in the next period. This current positive perception can be explained by overcoming the uncertain times which characterized the previous months of the crisis and also by the vaccine occurrence and the success of recent vaccination campaigns.
Investors confidence in the Romanian market is reflected in the answers regarding the investment plan for the next 12 months. More than half of the respondents (51.1%) expect investments to increase and only 13% will put them on hold. This result represents the highest score registered since the launch of BSI, companies surprising a maximum level of investments in the next year.
In addition, although the planned investments are significant, the investments allocated to the workforce are expected to grow at a slower pace (33.3% of respondents plan to increase). This could be a result due to the planned investments related to digitization which are not necessarily leading towards new jobs creation.
Investors believe that last year’s experience provided important lessons that can lead to future opportunities. Among the most important lessons learned by the business environment and implemented to increase the business resilience, we mention the following:
- Accelerating the digital transformation;
- Increasing business agility and flexibility;
- Cost optimization.
The trend towards digitization, which started at the European level, is one of the opportunities that the business environment managed to explore better during last year. The acceleration of digitization can be a good starting point and can bring a change in the distribution structure of the foreign direct investment stock, orienting investments towards industries with a higher degree of technological intensity.
FIC members believe that the next period is open for opportunities and will be characterized by economic growth which may exceed the European average, and the forecasts of the European Commission as well as those of international institutions (IMF, World Bank) show that 2021 is indeed shaping up in this direction.
The full results of the FIC Business Sentiment Index indicator, March 2021 edition, can be viewed here.