Romanian CEOs say reducing labour taxes would be best way to improve country’s business environment 

The new edition of the survey “Romanian Business Outlook in 2019” launched this week by Valoria and conducted in partnership with Doingbusiness.ro, uses comparative data from the first and second semesters to provide insights into companies’ forecasts on business in 2019.

According to 421 CEOs of Romanian companies, one of the measures that would most improve the Romanian business environment would be lower labour tax (84 percent), followed by the reduction of tax evasion (72 percent) and the development of infrastructure (61 percent).

Forecasts on turnover

Compared to the edition from the beginning of 2019, companies’ growth perspective in the second semester is more conservative. We see an 8pp (percentage points) decrease in companies expecting higher turnover by 5-10 percent, partially offset by a 5pp increase of those forecasting a 10-20 percent increase in turnover. At the same time, the share of companies that expect to maintain turnover in 2019 increases by 6pp. At the level of industries, the largest increase in turnover of 20-30 percent is predicted by 19 percent of food and agriculture companies.

Forecasts on profit

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The forecasts regarding profit from the second semester of 2019 are slightly more pessimistic on the 5-10 percent growth level, but more optimistic on the higher levels. Although 32 percent of companies (compared to 26 percent previously) expect their profit to increase between 10 percent and over 30 percent this year, we see increases on some levels of negative evolution. It maintains approximately the same percentage (9 percent against 8 percent) of companies that say their profit will not increase in 2019. By industry, the most important profit growth, of 10-20 percent, is expected by 32 percent of companies in the pharmaceutical and healthcare industry. 

Compared with the results of the survey in the first half of the year, those in the second half show adjustments to the turnover and profit that can be obtained in 2019 compared to the estimates at the beginning of the year. Even if in a slight improvement, a crisis of confidence persists and leads to increasingly cautious economic behavior, says Dumitru Ion, CEO at Kompass Romania and Doingbusiness.ro, co-author of the survey.

Forecasts on investments

Compared to the first semester, when 23 percent of companies said they would not increase investments in 2019, in the second semester 21 percent are of the same opinion. 43 percent of companies want to increase their investments by 1-10 percent compared to 36 percent previously. Only 14 percent of companies say they will increase investments by 20-30 percent and over 30 percent in the second half, compared with 11 percent in the first half of the year. By industry, the largest increase in investments is expected by 23 percent of Agriculture and Food companies that say they will increase investments by 10 percent-20 percent this year.

Forecasts on the number of employees and wages

29 percent of Romanian companies do not expect any increase in the number of employees in the second semester compared to 26 percent in the first semester. At the same time, in both semesters, 41 percent of companies said they expected their staff to increase this year by 1-10 percent. On the upper levels, from 20 percent to over 30 percent, 11 percent of companies expected their number of employees to increase in the second semester, compared to 5 percent in the first semester.

Of the analyzed industries, the one that estimates the highest growth is the Agriculture and Food industry, in which 24 percent of companies expect 5-10 percent increases in the number of employees this year.

If at the beginning of 2019, 22 percent of companies did not expect wage increases, in the second semester the percentage has dropped to 18 percent. The share of companies that will increase wages by 5-10 percent in 2019 decreased by 2pp, but the share of companies expecting a growth of 10-20 percent has increased from 12 percent in semester one to 17 percent in semester two. 

Public sector wage growth is not as much shored up in the private sector, and the confidence that this year will be favorable, albeit at low levels, shows a marginal increase in the second half compared to the first. After a year-end dominated by the electoral stakes, we will see the results of 2020, says Diana Dumitrascu, Executive Director Doingbusiness.ro, co-author of the survey.

Top 5 challenges and opportunities 

The most important challenges for companies in the second half of 2019 are: attracting and retaining workforce (62 percent), increasing competition (55 percent), managing business expansion (34 percent), increasing costs (28 percent) and collecting invoices (26 percent).

For Romanian companies, the most important opportunities reported in the second semester of 2019 are: demand growth (43 percent), new products and business lines (41 percent), upgrades and digitization (34 percent), development on foreign markets (28 percent) and accessing European funds (28 percent), according to the survey.