In the context of the current technological, demographic and cultural changes in Romania, EY carried out a comparative analysis of two of the country’s largest cities: Bucharest and Cluj-Napoca. The analysis aims to identify the main differences and the development rates of each city’s demographics, education, economics, culture and tourism. At the same time, it provided a useful outlook for both residents and those who intend to open a business in one of the cities.
Bucharest is the city with the largest number of inhabitants, and the most important industrial and commercial center in the country. According to Oxford Economics, in 2017 it was one of the best-performing cities, with higher economic growth than the European average. This is largely due to the service sector, which is increasingly important for the capital, with a share of 23 percent of GDP in 2017.
Cluj-Napoca, however, came in 29th in a ranking that measures the quality of life in 72 cities in Europe, ranking 26 places higher than Bucharest. Cluj scores better than the capital not just in terms of quality of life, but also for safety, medical facilities, transport services and traffic jam management, according to Numbeo center data. The cost of rent in relation to income raises a problem in the Transylvanian city, as it is almost two points higher than in Bucharest (12.6 vs. 11).
Thus, the comparison between Bucharest versus Cluj-Napoca brings forward information relevant to the economic environment, both for those who are thinking of opening a business on their own or perhaps choosing a place to develop a career.
The conclusions of the research carried out by EY Romania based on the latest data from the National Institute of Statistics (INS) and the National Trade Register Office (ONRC) show the following:
- Population growth is at a more stable pace in Cluj than in Bucharest. The capital’s population has fallen over the last 5 years analyzed (2013-2017) by approximately 55,000 inhabitants (0.7 percent). On the other hand, the number of inhabitants of the city of Cluj-Napoca increased by about 2 percent during this period.
- Bucharest imports human capital by attracting the largest number of immigrants compared to other cities, while Cluj records a small loss in this chapter. The increase in the number of inhabitants in Cluj in the last 5 years is based mainly on positive natural growth. By comparison, the negative natural increase registered in Bucharest has the effect of decreasing the population of the capital.
- Both cities have a steady flow of students, but Bucharest, with more than 30 universities, has the most graduates with potential to join the labor market.
- In Cluj, the percentage of employees in the total population is higher than in Bucharest (50 percent vs. 43 percent), even in the IT field. The Transylvanian city remains the leader in the number of employees in the field relative to its population (1.9 percent vs. 1.4 percent).
- In the 5 years of reference, the unemployment rate at the local level has been higher in Bucharest, thus maintaining steady throughout the analyzed period (1.3 in 2017), compared to Cluj-Napoca (0.7 in 2017).
- The highest rental price is registered in Cluj-Napoca – about 3 percent higher than in Bucharest. Also in Cluj, we see a cost of up to 20 percent higher for a square meter for dwellings on the outskirts of the city. But Bucharest is more expensive for utilities (water, electricity), + 3 percent, but also for dining in restaurants – up to 20 percent.
- With a number of dwellings 6 times higher than in Cluj (850,000 vs. 142,000) due to the larger size, the capital does worse in terms of living space. The houses in Bucharest are on average smaller by about 4 square meters. And when it comes to green space, the citizens of Cluj enjoy more of it, with 4 square meters extra per capita (21.4 square meters in Bucharest vs. 25.3 square meters in Cluj Napoca).
- The largest increase in the registrations of new firms and sole traders in 2017 took place in Cluj county, with 50 percent more compared to 2016 (5,674 vs. 8,532). Although the increase is higher for Cluj (50 percent vs. 23 percent), 70 percent more companies were set up in absolute values in Bucharest.
- Similarly, although it leads a detached country in terms of number of tourists, the capital remains behind Cluj in increasing their number from one year to another (relative growth Bucharest 23 percent vs. 50 percent in Cluj). However, the capital remains more attractive from a cultural point of view and has many cultural objectives to visit.
The data analyzed for the two cities confirms Cluj as the main competitor of the capital with its high standards of living, the management of the labor force through the low unemployment rate, the increase in the number of employees, implicitly the increase in the number of inhabitants and the number of tourists, developing a strategy to stimulate the economy through partnerships with local universities based on innovation, technology, research, IT.
However, the negative demographic changes will influence the economic development of the capital, the economic growth rate in Bucharest slowing to 2.3 percent GDP growth over the next five years, while in the year 2017 there was an increase of 7.2 percent, according to Oxford estimates Economics. The active population of the capital has fallen by about 3 percent in the last few years, and it is expected to keep the same rate of decline for the next 5 years, which will have repercussions on the creation of jobs in the capital.
“Given that the tax system in Romania is unitary, the authorities’ level of taxation is very limited, and the competition for attracting investments takes place in sectors other than taxation. It is therefore possible that better geographic location (proximity to the western border of the country) and local infrastructure policies are decisive factors leading to a spectacular growth of Cluj compared to Bucharest. In addition, the evolution of other major cities in Romania, Timisoara and Iasi is already in a strong effervescence, just as Oradea and Alba Iulia are very strong,” says Gabriel Sincu, associate partner in the Department of Tax and Legal Assistance, EY Romania.