Bogdan Tudorache

A new EIB Investment Survey for Romania reveals that the COVID-19 pandemic is expected to add pressure on private investments, however, most companies are already investing or planning to invest in climate related projects.

It showed that over the last financial year, more firms increased than reduced investment. However, the investment outlook is negative. Firms in Romania became, on balance, more pessimistic about the short-term outlook, very similar to EU peers, reveals the survey consulted by energynomics.ro.

At the same time, three-quarters of firms (75%) say that climate change currently has an impact on their business, well above the EU average (58%) while, two-thirds of firms (66%) report already investing or planning to invest in climate related projects, in line with the EU average (67%). However, only 37% of firms managed to invest in measures to improve energy efficiency, well below the EU average (47%).

Pessimism is greatest about the economic climate. Uncertainty about the future remains the most cited long-term barrier to investment (82%), followed by the limited availability of skilled staff (72%). Firms in Romania are more likely than EU peers to cite adequate transport infrastructure as a long term barrier to investment (63% versus 40%).

“In such an environment, public investments will be crucial to boost economic recovery and guide the transformation towards more digital and greener economies. Even with limited fiscal space, reprioritising public investments against current expenditures and higher fiscal predictability would help crowding-in private investment necessary for the transition to green and smart” said Debora Revoltella, EIB Chief Economist.

Around a quarter (27%) of firms in Romania report abandoning or delaying investment plans as a result of COVID-19, fewer than the EU average (35%). The same proportion of firms in Romania (27%) also report continuing with investment plans albeit on a reduced scale or scope. In the last financial year, the main purpose of investment is to replace existing buildings, machinery, equipment and IT (43%), and the highest share of investment was in machinery and equipment (56%).

Around one in ten firms face finance constraints, and reliance on internal financing sources remains high. Access to finance is more of an issue in Romania than in other EU countries and firms lagging with investments in digitalisation and energy efficiency face greater difficulties in successfully tapping external financing.

“At the European Union level there is a growing consensus that the recovery from the current corona crisis needs to be sustainable. The European Green Deal and the Next Generation EU funds provide a unique opportunity for resource reallocation and transformation towards greener and more digitalized economies. We should seize this opportunity. Moving forward, central banks and supervisors in Europe and around the world are laying the groundwork to integrate climate risks into their activities, to an extent consistent with their mandates,” says the Governor of the Romanian National Bank, Mugur Isărescu.