EY Romania Attractiveness Survey: 67% of investors foresee increased investment appeal in Romania

Romania firmly maintains its resilient market position, despite a 13% decline in foreign direct investment in 2023, capturing the confidence of investors who still see its potential – according to the EY Romania attractiveness study conducted in the first part of 2024.

The year 2023 was marked by nuanced changes and a dynamic evolution of FDI, reflecting the general trend of a 4% decrease in the number of FDI projects in Europe.

The number of newly created jobs recorded a smaller decrease of 8% (from 6,460 to 5,935 between 2023 and 2022), which means larger projects on average. In the general context of Central and Eastern Europe, Hungary recorded better performance, and Romania surpassed Greece and Bulgaria in the number of FDI projects in 2023. Additionally, Romania ranks fifth in terms of the average number of jobs created per project, surpassing strong competitors such as Poland.

Almost half (46%) of the executive leaders interviewed in the study consider Romania to have remained a robust and resilient market for investments in 2023, mentioning plans to consolidate or expand their operations here in the near future.

Bogdan Ion, Country Managing Partner, EY Romania and Chief Operating Officer for EY Central and South-East Europe and Central Asia Region: “The favorable outlook is recognized by 67% of investors, who anticipate an increase in Romania’s attractiveness as an investment destination over the next three years. Romania stands out by surpassing Greece and Bulgaria in the number of FDI projects and by ranking fifth in Central and Eastern Europe in terms of the average number of jobs created per project. Access to non-reimbursable financing is considered a key factor by 72% of investors. Sectors of interest include software and IT services, electronic products, transportation and logistics, which dominate in attracting foreign direct investments. The integration of emerging technologies and access to a well-trained workforce are essential, thereby strengthening Romania’s position as an attractive destination for sustainable investments with significant long-term impact.”

Bucharest continues to dominate as the main destination for FDI, with a substantial share of 40%. Iași and Timișoara each recorded 3 investment projects respectively, and Cluj-Napoca and Brașov with 2 projects each. However, compared to last year’s data, this year’s investment pattern suggests a deviation from the traditionally focused attention on major economic centers, signaling a wider dispersion of projects across various cities.

Regarding the origin of FDI flows, the main investors remained the same, with Germany maintaining its leading position in the Romanian investment landscape, with 16 projects, the same as in 2022. Following closely behind were the United Kingdom and the USA, each with 6 projects.

The main sectors attracting foreign direct investment in 2023 reflect key trends observed in Europe, with the software and IT services sector at the top, while the electronics products sector took a remarkable second place, differing from the European ranking. The transportation and logistics sector is once again in the spotlight, recording a sharp advance to third place in the ranking of foreign direct investments in Romania, a significant jump from ninth place last year.

Key drivers of FDI: favorable tax system, adoption of technologies, and availability of labor

Investors are attracted by opportunities for expansion into new markets, and Romania stands out with its advantageous tax system, adoption of emerging technologies, and availability of skilled labor. A significant 52% of respondents see access to unexplored markets as a key factor, while 37% appreciate the tax system and 35% the leveraging of new technologies. These aspects highlight Romania’s strategic position between East and West and create an environment conducive to innovation and business, with tax advantages that place it in a favorable position compared to other European countries.

The quality and availability of labor in Romania are also appreciated, with 26% of investors considering them among the top three attraction factors, marking an increase from the previous year. However, partial access to the Schengen area by air and sea raises concerns about labor migration and the potential brain drain, which could affect the country’s competitiveness by increasing the labor deficit and putting pressure on wages.

Nevertheless, the prospect of Romania’s integration into the Schengen area is viewed optimistically by investors from Central and Eastern Europe, who anticipate new opportunities, especially in tourism. Schengen accession is seen as a factor that could improve Romania’s trade performance, similar to the experiences of other countries in the region.

An impressive 72% of investors consider access to non-reimbursable funding to be a key factor in attracting foreign direct investment (FDI). Although national incentives are no longer as attractive as in the past, non-reimbursable funding remains essential for investment attractiveness. Romania stands out with the availability of a wide range of state aid programs, with EU funds that can be used for major capital investment projects. Over the next three years, state aid is estimated to reach 2 billion euros, exceeding the sum of 1.2 billion euros from the 2021-2023 period.

Romania can consolidate its position as an attractive center for sustainable investments

Although the number of foreign direct investment (FDI) projects in Romania in 2023 decreased by 13%, investor optimism remains strong, with 67% anticipating an increase in the country’s attractiveness as an investment destination over the next three years, compared to 41% in the previous year. This confidence is supported by Romania’s legislative and regulatory improvements and the emphasis on strategic sectors with growth potential. In addition, efforts in digitalization and innovation, along with infrastructure modernization and administrative process optimization, are seen as key factors in attracting investors. However, inflation is identified as the main risk to Romania’s attractiveness, with 14% of executives expressing concern in this regard, followed by public debt and geopolitical tensions. Nevertheless, Romania is expected to consolidate its position as an attractive center for sustainable investments, supported by an anticipated real GDP growth and a decrease in inflation in the coming years.