German companies in Romania consider their own businesses and prospects to be stable, but request more investment in education and research from the Romanian authorities, reveals cthe more recent current situation questionnaire, carried out by AHK Romania this spring.
The survey presents the current economic and business situation of the companies, but also provides an overview of the most important risk factors for business development from the companies’ point of view, as well as an assessment of the conditions that Romania offers as an investment location.
Thus, the current situation of German companies in Romania has slightly worsened, compared to the spring of 2023, which is now considered good by only 33% of those surveyed (in 2023: 45%). A percentage of 59% of them consider the current situation to be satisfactory (2023: 47%), while 8% consider it bad. In relation to expectations regarding the evolution of their own businesses, there are no significant changes compared to last year, with the mood being generally positive: almost 40% of those questioned believe that their businesses will do better in the next 12 months (2023: 46%) , and 22% see them getting worse (2023: 16%).
And the estimates regarding conjuncture over the next 12 months they got slightly worse than last year. Thus, only 19% of respondents expect an improvement (2023: 25%), while 38% are pessimistic (2023: 29%), and 43% do not expect any change (2023: 46%). More than 42% of the companies surveyed expect an increase in turnover this year, while 33% of them expect no change. “Despite the relatively good business situation and positive prospects, German companies in Romania fear negative developments in the fiscal framework starting in 2025, against the background of the high structural budget deficit and the need to take drastic measures after this year’s elections. We remain convinced that tax evasion in particular must be combated more effectively before higher taxes are levied on those who already pay taxes and duties”, declares Sebastian Metz, general director and member of the Board of Directors of AHK Romania.
It is gratifying that companies intend to keep theirs the number of employees, even increase it: more than 41% of those asked said they want to hire more staff (2023:42%), and 41% declare that they will maintain their number of employees. And intentions related to INVESTMENT remain unchanged for the next 12 months. 34% of companies plan to increase investments (2023: 40%), while only 20% are more cautious and plan to spend less on investments (2023: 24%).
The biggest risks to development are, however lack of qualified staff and increasing labor costs (for 58% of companies). To counteract these risks, companies propose as measures continuous training (57%), acceleration of automation and digitization (57%), intensification of cooperation with educational institutions (45%). Calling on temporary workers is also considered by 28% of companies (2023: 14%).
Another business risk is decrease in demand, a risk taken into account by 49% of the surveyed companies. They expect a continuation of the demand crisis, both from the country and from abroad. Low demand is also partly due to the poor economic situation in Germany. Energy prices and of raw materials it also continues to cause problems for companies. On the other hand, companies no longer consider the “classic” risk related to so high infrastructure. Only 11% of them still see this factor as a risk, after financing and legal stability. “Infrastructure development shows that Romania has made significant progress in this field in the last 2-3 years. Considerable investments have been and are being made in the development of economic infrastructure, including the development of roads/highways, railway infrastructure, energy production and the development of electricity networks, the latter being absolutely necessary, especially in the context of the transition to green energy “, says Sebastian Metz, general director of AHK Romania.
In terms of the characteristics of the investment siteRomania wins points by membership of the European Union (72 percentage points), through the quality of telecommunications, including internet and services, with which 55% of companies are satisfied, and 19% very satisfied. It is also worth noting that access to public funding and from European funds (from -30 percentage points last year to -13 in spring 2024).
The conditions for research and development is on a positive trend (from -17 to -2 points), proof of the fact that Romania is becoming an increasingly important investment location for investments in research and development. The well-positioned university landscape at the national level creates good conditions in this regard. But in the field of education, both in the university and vocational training areas, improvements are needed. The level of satisfaction of companies related to this aspect is low (-2 and -31 % points respectively). “Urgent, significantly higher investments in professional and continuous training are needed, both on the part of the companies, but especially on the part of the Romanian state. Otherwise the digital and green transition of our economy will not succeed, because for this we need qualified personnel. The target must be to reach the threshold of 6% of GDP for education and 2% of GDP for research”, emphasized Sebastian Metz, general director of AHK Romania.
Availability of qualified personnel is one of the biggest challenges for companies and concerns both skilled workers and university graduates. The migration of Romanian specialists to Western Europe, the aging of the population, but also the underfunding of the education system are the main reasons for the acute lack of qualified personnel.
Productivity and performance employees, but also flexibility of labor legislation have lower scores than the previous year. And administrative and political framework conditions they have slightly worsened and remain in the negative range. Of these, the best rated are legal stability (-12 points) and social and political stability (-20 points), as they have undergone obvious positive changes compared to the 2018-2019 period.
Most of the companies that responded to the questionnaire are still concerned about disruption of supply chains. To permanently increase supply flexibility and security in supply chains, most focus on supplier diversification (over 38%) and product portfolio adaptation (25%). In the medium term, 25% of firms intend to shorten supply chains or enter into long-term supply contracts (24%).
To the question, if he would still choose Romania as investment location88% of companies surveyed said yes, the highest percentage since 2017.
About the survey:
The survey was conducted by AHK Romania together with 15 other bilateral German chambers of commerce from Central and Eastern Europe, in between February 19 and March 15, 2024on a sample of 90 companies members of AHK Romania and other companies with German capital in Romania.
On sectors of activitythe participation of companies was as follows: 39% services, 34% industry, 13% trade, 9% construction, 5% energy and water supply.
In terms of attractiveness, Romania ranks 9th in the region. The first places are occupied by Slovenia, Poland and the Czech Republic.
