Investors warn: Romania is losing competitiveness due to workforce crisis

The most recent results of the FIC Business Sentiment Index (carried out in September 2018) brings some important insights on both workforce and fiscal related topics. Still there is a continued dichotomy between FIC members expecting higher revenues and business growth in the short-term but being concerned about the lack of infrastructure and stability of the regulatory framework.

FIC maintains its position that, in due time, the lack of predictability and of investments will reduce the economy’s competitiveness and long-term growth potential.

There are two results that are worth mentioning:

• For the first time since FIC has been compiling this sentiment index (2015), a majority of respondents said that Romania is no longer competitive in terms of the availability of adequate workforce. Two years ago, only a quarter of respondents faced problems on the labour market. Every six months, when publishing the results of the Business Sentiment Index, FIC has warned that this indicator is deteriorating at an alarming rate. There is clear evidence that this is the new reality.

• In March 2017, one third of respondents found the Romanian fiscal burden uncompetitive. This was followed by a steep deterioration in September 2017 and March 2018 when two-thirds of respondents expressed a negative opinion about the fiscal system. This was due to erratic announcements of fiscal policy changes without a proper impact assessment and consultation. In the latest survey we noticed a significant improvement, with only one third of respondents complaining about fiscal issues. Currently there is a certain stability of the fiscal regime: measures announced last year were either implemented or abandoned and this year no major overhauls have been announced. Businesses managed to accommodate these changes despite the considerable effort this entailed.

FIC believes that Romania should not jeopardize its competitive advantage and be perceived as lacking fiscal competitiveness because of inconsistent policy and regulatory changes. FIC members urge the Government to maintain a stable fiscal framework and to be transparent about future changes.

At the same time, we believe that the public administration and the private sector need to work closely together to improve the Romanian labour market before it becomes a major impediment to further development.

This survey is carried out every six months only within the membership of the Foreign Investors Council (FIC), companies with a total turnover of RON 183 billion in 2016 and which employ approximately 200.000 people.