Ukraine conflict puts a damper on hopes of economic recovery

Mihai-Alexandru Cristea 02/06/2022 | 15:11

Just as the global economy started to move steadily towards recovery from the covid-19 pandemic, there was another major systemic shock. Russia’s invasion of Ukraine marked a tectonic shift in geopolitical risk levels. Beyond triggering a horrific humanitarian crisis in Eastern Europe, the economic effects of the conflict and the associated sanctions will be felt across the world, slowing down growth while adding to the pre-existing inflationary pressures.

By Anda Sebesi


Even though Russia and Ukraine together represent a relatively small part of the world economy, they account for a large share of global energy exports. The reliance of many European countries on Russia’s oil and gas has prompted a political debate on how to quickly and permanently lower this dependency. Both countries are also global major exporters of metals, intermediate manufacturing inputs, food staples, and agricultural commodities.

Due to its proximity to the conflict zone and its trade links with both Russia and Ukraine, the Central and Eastern Europe region has been the focus of a lot of concern since the conflict started. Romania was facing a pressing need for adjustments in its macroeconomic imbalances even prior to that moment. The country has been under the EU’s excessive budget deficit procedure since early 2020¬—although the pandemic led to its suspension in the meantime.

According to the Global Economic Outlook report published by KPMG in April 2022, efforts to bring down Romania’s relatively large structural budget deficit in the years to come could have a knock-on effect on its economic growth. In addition, the constant deepening of the current account deficit—which stood at -7.1 percent of GDP in 2021, the second largest in the EU—would require a gradual and rather immediate correction, in order to avoid further increases in the country’s financing costs.

The same source says that higher imported inflation would likely keep pushing up nominal interest rates, eroding consumers’ purchasing power and hampering short-term economic growth prospects. However, with the right policies in place, which should be aimed at encouraging investments and stimulating long term growth, Romania could weather this crisis.

While the has adopted EU several packages of economic and individual sanctions against Russia, the inflationary pressure intensified by the higher commodity prices and a deep recession of certain economic sectors such as automotive, transport, chemicals, political risk and uncertainty could make companies more reluctant to invest during this period. “The large-scale emigration from Ukraine (figures discussed by the specialists indicate over 5 million refugees to date, with an additional 6.5 million displaced inside Ukrainian borders) is another socio-economic factor with a significant impact,” says Alina Timofti, Partner and Co-Head of NNDKP Tax Advisory Services.

Alina Timofti, NNDKP

The complete absorption of funds available via the EU’s Recovery and Resilience Fund would go a long way in terms of improving domestic economic outlook. “While the situation remains difficult, Romania has several advantages. First and foremost, we are a NATO member, which offers a security guarantee. Moreover, the evolution of the military situation since the start of the invasion has so far considerably reduced initial concerns of the conflict potentially spreading to areas beyond Ukraine. Furthermore, Romania’s EU membership provides an indication of stability to investors, as well as offering all the benefits of the Single Market,” says Ramona Jurubita, Country Managing Partner at KPMG in Romania.

Ramona Jurubita, KPMG in Romania

She adds that the government and the business community need to present a clear message that Romania is not only a safe place to invest, but it also offers many opportunities in spite of the current challenges. At the same time, the authorities can further help growth with investor-friendly policies, such as support for key sectors like health and education as well as making full use of the available EU funding, especially to develop the country’s infrastructure.”


Vulnerabilities may become opportunities

Romania’s vulnerabilities could be turned into opportunities if the agriculture and energy sectors were treated as strategic, Timofti believes. She points out that, unlike Poland and Hungary, Romania may not necessarily among the first relocation options for Ukrainian businesses. However, with sustained, coherent support and a well-rounded strategy that is quickly designed and implemented by authorities (including local ones), the country’s attractiveness and its chances to become a relevant destination may increase. “Investment-related facilities ranging from fiscal and state aid schemes to the elimination of undue bureaucratic barriers are really helpful mechanisms in the context of a relocation decision,” Timofti notes.

According to Razvan Vlad, Partner in the NNDKP Corporate/M&A practice, despite the conflict being close to its borders, Romania continues to follow the business guidelines that were set prior to the beginning of the war, and investments in key sectors of the economy (such as infrastructure, healthcare, etc.) have continued as scheduled. “The legislative framework tends to remain quite stable and, with the exception of a couple of legislative acts aimed at addressing issues generated by Russia’s aggression against Ukraine, investors may rely on a relatively safe business environment and on laws which are adapted to EU regulations and requirements,” he says.

Razvan Vlad, NNDKP


Can Romania absorb the Ukrainian workforce?

Romania is facing a severe labour shortage in multiple important sectors. This trend has been accelerated by the pandemic, which fuelled the competition for talent even more, especially for roles where remote work fits like a glove. “In March alone, the number of job offers on BestJobs reached the 40,000 threshold, with most of them being in Sales, IT, Finance & Accounting, Management, and Engineering. We are also seeing an increase in candidate activity, but there is still a major gap between supply and demand in this field,” says Andrei Frunza, the CEO of BestJobs.

Andrei Frunza, BestJobs

The most recent data shows that almost 80,000 Ukrainian refugees have chosen to stay in Romania, out of more than 600,000 who have travelled through our country, and Romanian officials have announced that more than 1,770 Ukrainian citizens have been employed on the local market since the war broke out. Most of them were hired in industries like hospitality, manufacturing, construction, retail or auto services. “We definitely cannot call the military conflict an opportunity, but integrating Ukrainians into the local workforce is a challenge that we simply need to solve,” Frunza argues. He adds that BestJobs data show that Sales, IT, Finance/Accounting, Management, and Engineering remain the areas with the largest labour shortage. In most of these industries, jobs can be performed remotely by those who have the right skills and mindset and speak an international language. “Blue-collar positions are a good fit for international workers, as it is an area where having the hard skills required to perform a job is what matters most,” he adds.

Once refugees started coming to Romania, BestJobs thought about ways to help Ukrainian citizens find either short-term or long-term employment, offering companies the option to highlight openings that are also suitable for Ukrainians. “At this point, there are almost 1,000 job opportunities marked as Ukrainian-friendly by companies that are willing to hire Ukrainian citizens and provide additional support for their integration process. 80 percent are white-collar jobs for specialists with different skillsets and at least intermediate knowledge of English.”

But does Romania have the capacity to absorb Ukrainian workforce in the medium and long term? “It depends on the sector. IT specialists might all be absorbed right away. Medical professionals could also find it quite easy to find employment here. However, accountants, lawyers, and those whose training is based on Ukrainian laws and regulations will find it more difficult to do so,” says Perry Zizzi, President of the Romanian Diversity Chamber of Commerce (RDCC) and Managing Partner at Dentons Bucharest office.

Perry Zizzi, RDCC

When we talk about the integration of refugees into the labour market, it is important to look at our economy and society as a whole, but also at the EU response to this situation. “Today we are facing one of the biggest global displacement crises, so it is not about a single industry being ready to absorb Ukrainian workforce. It’s about a stable climate and a better future that involves all of us,” says Andreea Voinea, HR Director at BCR. She adds that compared to its European peers, Romania has little experience with large-scale immigration. In addition, the situation is quite similar in the region, as Eastern European countries are embracing the millions of Ukrainians fleeing war as potential workforce, and it will be difficult to handle such a huge inflow and integrate them all.

Andreea Voinea, BCR

“At the same time, we must not forget that the labour market is changing, and the past two years have brought a massive shift in the way work is perceived. We are now facing the so-called ‘uberization of work,’ and this can be a plus in terms of the integration of Ukrainian employees,” Voinea adds.

On the other side, the Romanian Labour Ministry announced last month that Romania’s workforce was lacking in numbers, especially in sectors such as construction, tourism, and hospitality. Earlier this year, the government issued a decision allowing 100,000 people from abroad to work in Romania, to cover the labour shortage recorded last year. In addition, in a relatively short time, the Romanian government revised the legal norms and introduced a series of derogations from the immigration legislation to allow Ukrainians easier access to the Romanian labour market. Romania’s Emergency Ordinance no. 20/2022 set out new support measures for Ukrainian citizens, which include the right to stay in Romania for work purposes without being required to obtain a long-term visa for local employment and free access to the Romanian unemployment system, under the same conditions applicable to Romanian citizens.

“In my opinion, we need close collaboration, and the Labour Ministry should continue to exchange ideas with companies, HR professionals, and job-matching services to create a long-term plan and encourage the adoption of Ukrainian workforce,” Voinea notes. Along the same lines, Zizzi believes that given the fragility of the global economy and the uncertainty caused by the conflict in Ukraine, it is difficult to say whether Romania could absorb all the Ukrainians who seek to remain on its territory. “In our experience, one of the biggest barriers to absorption (particularly that of blue collar workers) is their lack of Romanian or English language skills. That is why it is so important to offer language training as a way to integrate, and this is something that the RDCC is carrying out together with its partners,” he says, adding that most Ukrainian refuges have been hired by Romanian organisations in fields like call centres, support activities, IT, marketing or tourism agencies, beauty salons, hospitality (baristas, waiters)¬—so in both white collar and blue collar positions.


Banking industry ready to hire Ukrainians

Over the past few years, digital transformation has received considerable attention in the banking sector, and the job structure in this industry is constantly evolving. But what remains unchanged is people’s contribution. Delivering a top-notch employee experience is a priority, and banks are aware of the required balance between technology and human engagement across all channels. The banking industry needs talented people who can create solid products and design clear processes. It needs people with both hard and soft skills, who can perfect the customer experience and focus on understanding, supporting, and advising clients at a higher level.

According to Voinea of BCR, Ukrainians have been part of the international workforce for a long time now. “They are a highly skilled workforce, and we must take into account the fact that Ukraine has been one of Europe’s most popular locations for outsourcing tech development, generating more than 20,000 tech degrees per year according to the IT Ukraine Association. Moreover, 70 percent of Ukrainian workers have secondary or higher education degrees,” she says.

She points to the bank’s local project, Jobs for Ukraine, a recruitment platform developed by Jobful and InnovX-BCR to support Ukrainian citizens who are looking for a job in Romania. Voinea also adds that BCR has improved its operations, adjusting business flows to respond effectively to the needs of refugees, with the help of four Ukrainian employees that it recently hired, offering them critical roles in some of its branches and its Contact Centre.

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