92 percent of business owners who took part in the survey ‘The barometer of the Romanian business environment’ conducted by EY in partnership with DoingBusiness.ro said they do not endorse Romania’s consumption-based economic growth.
92 percent of the business owners polled said they do not support the growth model of the Romanian economy, which is based on consumption. A share of 45 percent of respondents say they are either pessimistic or very pessimistic about the evolution of the Romanian economy in the upcoming 12 months.
Compared to the previous editions of the survey, the percentage of those who say they are optimistic dropped. This points at concerns towards the model of economic growth based on consumption, towards inflation pressures and fiscal and legislative uncertainties, the survey argues.
Fiscal uncertainty is a major disruptor
Moreover, 85 percent of Romanian companies say their investment plans are disrupted due to fiscal uncertainty. Also, for 74 percent of companies the acceleration of organic growth and investment in existing operations represent the main priority. The majority of companies questioned, 99 percent of companies want a country strategy directed at sustainable growth.
The survey is based on an online poll that saw 458 participants in several sectors of Romanian economy. Out of the respondents, 8 percent have a turnover in excess of EUR 100 million, 9 percent between EUR 50-100, 34 percent have a turnover of EUR 10-50 million, 44 percent a turnover of EUR 1-10 million and 5 percent under EUR 1 million.
According to the INS, Romania’s economic growth in 2017 stood at 7 percent, according to the National Institute of Statistics (INS), and was boosted by consumption, which contributed with 6.4 percent to the increase of the GDP, while gross fixed capital formation had a contribution of 1.2 percent.
In this context, Romanian companies are less confident in the evolution of the local economic environment. On the other hand, they are confident in the evolution of the global economy: the demand of products and services (42 percent are optimistic about local economy/60 percent about the global economy) profitability (20 percent vs 35 percent), market stability (15 percent vs 32 percent), access to credits (24 percent vs. 40 percent), the evolution of the companies’ evaluation (18 percent vs. 31 percent) and private investment (22 percent vs. 41 percent).
According to the report, the biggest gaps are recorded in the case of market stability and evolution of investments, on the back of the impact of Romania’s fiscal and legal instability.
Top three challenges of the business environment
From the point of view of administration councils and business leaders in Romania, the most significant obstacles to business development arise from public policies and factors controlled by state institutions: fiscal and legal uncertainty (80 percent of respondents), the lack of political stability and lack of vision of public policies (69 percent) and red tape (46 percent).
A share of 85 percent of companies see their investment plans hit by fiscal and legal uncertainty. Only 13 percent of companies say their investment plans are not affected, while 2 percent said they cannot assess the impact.
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