EY Study: Economic Efficiency, Positive Birth and Quality of Life Promote Cluj in the Top of the Most Attractive Romanian Towns

EY Study: Economic Efficiency, Positive Birth and Quality of Life Promote Cluj in the Top of the Most Attractive Romanian Towns

In the context of the current technological, demographic and cultural changes in Romania, EY conducted a comparative analysis of two of the largest cities in the country, Bucharest and Cluj-Napoca.

The analysis aims at identifying the main differences and rhythms of each demographic, educational, economic, cultural and tourist development. At the same time, it offers a useful outlook to both residents and those who intend to open a business in one of the mentioned cities. Bucharest is the city with the largest number of inhabitants, 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 a higher economic growth than the European average. This is largely due to the service sector that is increasingly important for the capital, with a share of 23% of GDP in 2017.
Cluj-Napoca is ranked 29th in a ranking that measures the quality of life in 72 cities in Europe, being 26 places higher than Bucharest.

Cluj scores better than the capital not only in terms of quality of life, but also of safety, medical facilities, transport services and traffic jams in accordance with Numbeo data.
The cost of rents in relation to income raises a problem in the Transylvanian city, being almost two points higher than in Bucharest (12.6 vs. 11).

Thus, the comparison between Bucharest versus Cluj-Napoca brings attention to relevant information about 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 on the basis of the latest data from the National Institute of Statistics (NIS) and the National Trade Register Office (ONRC) show the following:

1. Population growth takes place at a more stable pace in Cluj than in Bucharest. The population of the capital has fallen over the last 5 years analyzed (2013-2017) by approximately 55,000 inhabitants (0,7%). On the other hand, the number of inhabitants of Cluj-Napoca increased by about 2 percent.

2. 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 growth registered in Bucharest has the effect of lowering the population of the capital.

3. Both cities have a constant flow of students, but Bucharest, with more than 30 universities, has the most graduates, with the potential to be placed on the labor market.

4. In Cluj, the percentage of employees in the total population is higher than in Bucharest (50% vs. 43%), even in the IT field. The Transylvanian city remains the leader in the number of employees in the field, relative to the population (1.9% vs. 1.4%).

5. In the 5 years of reference, the unemployment rate at the level of the locality is higher in the municipality of Bucharest, thus maintaining the entire analyzed period (1.3 in 2017), compared to Cluj-Napoca (0.7 in 2017).

6. The highest rent of the dwellings is registered in Cluj-Napoca, about 3% higher than in Bucharest. Also in Cluj, one can see a cost of up to 20% higher for a square meter of the dwellings on the outskirts of the city. But Bucharest is even more expensive for utilities (water, electricity), + 3%, but also for dining in town at the restaurant - up to 20%.

7. With a number of dwellings six times higher than in Cluj (850,000 vs. 142,000) due to the larger area, the capital is coded in terms of habitable surface. The houses of Bucharest are on average smaller by about 4 square meters. And when it comes to the green space, the citizens of Cluj are enjoying more, with 4 more square meters per capita (21.4 m ^ 2 in Bucharest vs. 25.3 m ^ 2 in Cluj Napoca).

8. The largest increase in the registrations of new firms and PFAs in 2017 took place in Cluj County, with 50% more compared to 2016 (5674 vs. 8532). Although the growth is higher for Cluj (50% vs. 23%), 70% more companies were set up in absolute values ​​in Bucharest.

9. Similarly, although it leads detached at the country level in terms of number of tourists, the capital remains behind Cluj in increasing their number from one year to another (relative increase Bucharest 23% vs. 50% in Cluj). But the capital remains more attractive from a cultural point of view, having several cultural objectives to visit.

The data analyzed for the two cities confirm Cluj as the main competitor of the capital with the high standards of living offered, 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% GDP growth over the next five years, while in 2017 there was an increase of 7.2%, according to Oxford estimates Economics.
The active population of the capital has fallen by about 3% over the past years and it is predicted 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 in Romania, the tax system is unitary, the authorities'" margin of maneuver "in the field of taxation is extremely limited, 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 be some decisive factors that will lead 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 strong behind" says Gabriel Sincu, Associate Partner in the Department of Tax and Legal Aid, EY Romania.






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