The COVID-19 pandemic has impacted Foreign Direct Investment levels across the globe. In 2020, investors were looking at the way the pandemic was handled in destination countries, apart from social and political stability, labor supply and cost-competitiveness of the country. In Romania, the decrease in FDI was significant, but Romania’s capabilities in the IT sector, logistics projects and retail development projects attracted investors, with 57 projects registered in 2020, which generated almost 2000 new jobs, according to the EY Romania Attractiveness Survey study, an attractiveness study dedicated to the Romanian market.
“Romania witnessed the highest GDP growth in the European Union in the first quarter of 2021, but the challenge is yet to be surpassed. The pandemic has modified global economic trends, causing modifications in investment plans and changing the factors investors take into consideration when assessing investment destinations. In order to make the growth of our country a sustainable and healthy one, Romania must establish itself as a stable, attractive investment destination”, says Bogdan Ion, Country Managing Partner EY Romania & Moldova and Chief Operating Officer for EY South-East & Central Europe and Central Asia (CESA).
About 75% of investors state that their 2021 investment plans are no longer influenced by the COVID-19 pandemic, while only 5% say their investments were disrupted due to the outbreak. By comparison, in 2020, 43% of investors said they had been influenced by the local response towards the pandemic. The focus on this crisis is steadily decreasing and shifting towards the structural changes that this crisis generated, as well as allowing other factors to thrive in investment decision-making.
In the nest 12 month, 66% of investors plan to establish or expand operations in Romania in the next 12 months (above European average – 41%), compared with just 27% in 2020. Infrastructure, crisis management strategy, as well as the overall level of technology adoption are cited as the main factors considered by investors when thinking about investments in Romania.
On long term, 41% of investors believe Romania’s attractiveness will improve during the next three years and the main priorities should be: supporting SMEs (36%), encouraging environmental policies and attitudes (33%) and improving product quality and added value of services (31%).
Romania’s foreign Direct Investment in times of the COVID-19 pandemic
In line with the overall European market and the previous year trends, the software & IT sector in Romania attracted the largest numbers of FDI projects, with a 32% market share. Wholesale, retail & distribution sector ranked second, with a 18% market share. The sector generating the largest number of jobs, occupying the third place, is set to be the electronics industry.
Last year’s first runner-up, business services sector, suffered a substantial decrease (-10% in market share).
Large cities are still the most popular FDI destination. Logistics, a growing opportunity
Bucharest, Cluj-Napoca, Timisoara, Brasov, Iasi, these 5 cities represent the location of almost 70% of all FDI projects of 2021, clearly demonstrating the preference of foreign investors for large, developed destinations.
In terms of types of investment projects, logistics dominated the FDI arena, with almost one third of the projects announced for 2021 focusing on this type of operations. Sales & marketing projects follow on the second place, and surprisingly, on the third place, research and development projects. The latter type of activity shows a new interest coming from foreign investors in this area, considering Romania has not attracted R&D many projects in previous years.
Bucharest has been the top FDI destination in Romania for more than a decade. Nevertheless, investing intentions gathered in the survey shows a new interest for other regions, particularly the Western region of Romania, as well as South-Eastern region of Muntenia. The North Eastern part of Romania has not witnessed significant improvements in terms of FDI, mostly due to the lack of appropriate infrastructure.
