BR COVER STORY | Competitive potential key to Romania’s (post-pandemic) recovery

Mihai-Alexandru Cristea 14/04/2020 | 16:08

It is hard to talk about economic competitiveness in the context of the global coronavirus pandemic, but it is nonetheless necessary. The most competitive economic areas will be the main pillars of the future recovery from the imminent recession.

By Claudiu Vrinceanu


To understand the post-COVID-19 economy, we should identify the benchmarks of a competitive environment. How can we measure economic competitiveness? The competitiveness of an economy can be evaluated first and foremost on the quantity and quality of its exports, the dynamics of investments, the quality of infrastructure, and the human resources. Do we want to be more competitive in the context of a future economic recovery in the second half of 2020? Then we need to focus on the added value of our products or services, their market share, as well as on the level of exports in relation to companies’ turnover and profitability.

In order to survive in the international competition of the future, we need higher investments in both the private and the public sectors, based on data from the World Economic Forum’s latest index of Global Competitiveness, which ranked Romania as the 51st most competitive country in the world. Competitiveness is defined as the set of institutions, policies and factors that determine a country’s level of productivity.

Romania has climbed one spot in the ranking compared to the previous year, coming in above Mauritius, Oman, and Uruguay, and below Mexico, Bulgaria, and Indonesia, in a list of 141 countries analysed by the WEF. The WEF’s index looks at 12 pillars of development, all of which contain several sub-topics that each get a score out of 100 – Institutions, Infrastructure, ICT adoption, Macroeconomic stability, Health, Skills, Product market, Labour market, Financial system, Market size, Business dynamism, and Innovation capability.

Romania’s highest rankings were for pillars such as ICT adoption, Market size, Institutions, Infrastructure, and Innovation capability. On the other hand, the country ranked lowest for the following competitiveness pillars: Financial system, Health, Skills, and Business dynamism. As for Romania’s performance in the post-COVID-19 recovery period, several key sectors will adapt to the new conditions. We’ve developed a forecast of opportunities in several industries selected by the Business Review team, which we see as the fields with the greatest growth potential in the medium and long term.


Retail post-COVID-19

On the one hand, online retail, which is already booming these days, will grow even more as consumers spend less time in public areas. We also expect massive gains in e-commerce delivery services. On the other hand, retail as a whole, which had been on a ten year-long growth cycle, will likely show contraction for the first time since the last recession. According to the most positive scenario, we will have an economic recovery in May with 50 percent of the turnover of the period before the crisis. The most pessimistic option involves a restart in August, with 30 percent of the turnover. The evolution of sales will vary depending on the areas. According to estimates by eMag, some commerce categories will experience a drop of 30-50 percent (based on what happened in China): fashion, home appliances, cars. But there will also be areas of high growth in retail, namely IT and care products.

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Chemical industry must adapt

Reinvention will be the keyword in the chemical field, and this is confirmed by the current economic realities. For example, Chimcomplex, the former Oltchim, has started biocidal production on its Ramnicu Valcea and Onesti platforms. The company has received biocidal approval for sodium hypochlorite concentration 1.25 percent from the Health Ministry. Chimcomplex has modified its industrial production lines in recent weeks in order to be able to produce sodium hypochlorite as a necessary product for public health in the context of the coronavirus pandemic. The first deliveries will be prioritised according to emergencies and institutions that urgently need disinfection of external spaces. The company estimates that it will initially reach a delivery capacity of 1,000 tonnes/county.

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HR in the next economic cycle

There are many employees who say they would rather be in the office than at home. Co-working spaces in office buildings serve exactly this need for socialising. However, the main lesson will be in the usefulness of a flexible lease contract as opposed to a rigid one, so that you can reduce/increase it your space depending on how many people you have working remotely and how many are at the office.

The evolution of HR will also affect the real estate sector. Even if people will be going back to the office, I think the percentage of time worked from home will increase from 5-10 percent before the crisis to 30-50 percent after the crisis. The office will be flexible and the extra space will be let go.

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IT&C: Two opportunities for a competitive economy

The two main opportunities in the Romanian IT industry that will bring results in terms of economic competitiveness are private organisations’ need for digital transformation and the digitalization of the public system. Romanian society will depend on digital infrastructure and online communication. The industry’s reaction will have a major impact in maintaining the new normality and future opportunities will be generated by those companies that will be able to adjust themselves and manage to stay relevant. The Romanian IT market was focused on outsourcing resources (low risks, big volumes, low margins) and, more recently, on product startups (high risks, volume volatility, high margins). The country’s public administration has every chance to be digitalized, and the crisis generated by COVID-19 can accelerate this process.

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From Coronavirus Outbreak to New Economy

What is there to be done in the economy in the context of the coronavirus pandemic? This is the first time when public policy has faced a stop-and-go paradox: we need to stop mobility and interaction in society and, at the same time, we need to (re)start the economy through various proactive measures and schemes to support employees and entrepreneurs. In order to stop the spread of the pandemic, authorities impose strict measures to isolate people and reduce their mobility.

“However, to hope that liquidity injections will be able to restart the economic system in the current pandemic situation, as has been the case in classic economic crises, might prove unwarranted given the wildly different contexts. The measures that worked 11-12 years ago will not have the same results in the current context of a public health crisis. Currently, the real economy is frozen and decoupled from the financial sector,” said Cosmin Marinescu, Economic Advisor to Romanian President Klaus Iohannis.

In these conditions, economic measures to stimulate demand and production, whether through monetary or fiscal channels, are somewhat in contrast to the “stay home” objective of this emergency situation. In the meantime, there was strong emphasis on the need to prevent the fall of financial systems through liquidity injections. It is a prophylactic measure to ensure financial stability, which will alleviate the population’s feelings of anxiety.

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