Romania is a market with tremendous potential, a strategic location, and a business environment that offers opportunities amidst some risks. Reducing those risks and realizing the opportunities require patience and a careful sifting of market information.
After several years of strong growth, Romania slumped into a deep recession in 2009 with GDP contracting by more than 7%. The contraction moderated in 2010 to minus 2% of GDP, and most forecasts see a gradual return to growth of 0.5% to 1.5% in 2011, positive but still lagging behind most of the European Union. Forecasts for succeeding years are more encouraging, as most predict the rate of economic growth to accelerate further.
Stabilization of the economy has been due largely to a €20 billion ($27.4 billion) rescue package led by the International Monetary Fund (IMF). Romania has shown commitment to meeting the terms of the agreement with IMF, implementing a tough austerity program to reduce its budget deficit to 4.4% of GDP in 2011 and to 3% of GDP in 2012.
Several of these measures, including an increase from 19% to 24% in the value added tax (VAT), and a cut of 25% in public sector salaries, depressed consumer demand and spending predictably. This increase in VAT also contributed to inflation of about 8%in 2010, the highest rate in the EU, with a notable jump in food and energy prices. However, inflation is widely expected to decrease in 2011, even as economic conditions improve led by relatively strong export performance and a gradual rebound in demand.
Despite the weak economic conditions, there are opportunities for American business in areas such as energy, agricultural equipment, environmental technologies, infrastructure, and ICT. As the economy recovers, additional opportunities will emerge in areas such as franchising, hotel and restaurant equipment, automotive parts, packaging, and other industrial equipment.
Successful entry into the Romanian market requires solid preparation, and market research is an important part of any business strategy. The balance of this report is intended to aid American companies in developing and executing new and increased sales to this important – if still transitional – new EU member state.
After several years of strong growth, Romania slumped into a deep recession in 2009 with GDP contracting by more than 7%. The contraction moderated in 2010 to minus 2% of GDP, and most forecasts see a gradual return to growth of 0.5% to 1.5% in 2011, positive but still lagging behind most of the European Union. Forecasts for succeeding years are more encouraging, as most predict the rate of economic growth to accelerate further.
Stabilization of the economy has been due largely to a €20 billion ($27.4 billion) rescue package led by the International Monetary Fund (IMF). Romania has shown commitment to meeting the terms of the agreement with IMF, implementing a tough austerity program to reduce its budget deficit to 4.4% of GDP in 2011 and to 3% of GDP in 2012.
Several of these measures, including an increase from 19% to 24% in the value added tax (VAT), and a cut of 25% in public sector salaries, depressed consumer demand and spending predictably. This increase in VAT also contributed to inflation of about 8%in 2010, the highest rate in the EU, with a notable jump in food and energy prices. However, inflation is widely expected to decrease in 2011, even as economic conditions improve led by relatively strong export performance and a gradual rebound in demand.
Despite the weak economic conditions, there are opportunities for American business in areas such as energy, agricultural equipment, environmental technologies, infrastructure, and ICT. As the economy recovers, additional opportunities will emerge in areas such as franchising, hotel and restaurant equipment, automotive parts, packaging, and other industrial equipment.
Successful entry into the Romanian market requires solid preparation, and market research is an important part of any business strategy. The balance of this report is intended to aid American companies in developing and executing new and increased sales to this important – if still transitional – new EU member state.
