Romania climbs for the first time in top 15 most attractive countries in Europe regarding the number of FDI projects attracted in 2014, according to EY’s annual report – European Attractiveness Survey, which analyzed the responses received from 808 top executives. Last year, countries such as Poland, Serbia and The Czech Republic were present in this ranking, but this year, the only country in Central and Eastern Europe present in this top alongside Romania is Poland.
In 2014, Romania succeeded in attracting 62 FDI project, 19% more than in 2013. Furthermore, Romania became the sixth country in Europe considering the number of FDI jobs created, exceeding Spain, Turkey and Slovakia. With a record number of 10,892 new FDI jobs, our country practically attracted almost as many jobs as Germany, registering a 77% growth of FDI jobs year-on-year.
Foreign investors are looking at Romania, but most of the times because of its cheap labor force. It is highly important that we go beyond this perception and attract those investments that create highlyqualified and well-paid jobs, which can motivate Romanian specialists to stay in the country and create added-value here.
Looking at this year’s macroeconomic picture, Romania’s economic performance in Q1 was stronger than expected, with a quarterly 1.6% rise in GDP lifting annual growth to 4.2%. While this pace is very unlikely to be sustained during the rest of the year, the outlook still appears relatively optimistic. Indeed, the European Commission measure of economic sentiment in Romania reached a new six-year high in April. Provided that the Eurozone recovery does not fizzle out, we expect Romania’s GDP to grow by 3.1% in 2015 and 3.2% in 2016, before edging a little higher in 2017-2019.
In 2014, real household consumption grew at its fastest pace since 2008, including a 2.6% quarterly gain in Q4. And the strong data have carried over into this year, with average wages growing by nearly 7% year-on-year in January and February.
We expect private consumption to grow by over 4% in 2015, following on from the 5% expansion recorded in 2014. Robust wage growth, of over 6%, combined with very low inflation is boosting consumers’ purchasing power.
Consumer spending is now a key driver of Romanian growth after a long period of stagnation following the global crisis – during which it slumped by nearly 10% in Romania. The trend in spending is now firmly upwards, reflecting higher confidence and rising real wages. Investment is also expected to pick up in response to the higher level of business confidence, although the scale of the improvement will be heavily dependent on sentiment about Eurozone prospects.
Western Europe overtakes China and North America as #1 investment destination with FDI projects at record high in 2014
FDI into Europe hits a new record with US$305 billion attracted into the region in 2014, translating to a 36% year-onyear growth, despite global growth slowdown. Last year alone, 43 European countries – including Russia and Turkey – drew 4,341 projects reaching a 10% growth over 2013 and created 185,583 jobs (+12%).
According to EY’s study, Western Europe attracted 50% of investments worldwide in 2014, up from 45% last year, overtaking China as the most attractive investment destination, which saw a 6% decline in projects to 38%. An increase in North American investment, up from 31% to 39%, placed it in second place and saw China pushed down to third place.
Country and city ranking: Who is winning the European attractiveness race?
More than half (52%) of FDI projects and 30% of jobs created by investments into Europe were captured by the top three destinations: the UK, Germany and France. The UK is still the number one destination in terms of FDI projects and jobs. Turkey is a new entrant into the top 10 countries by FDI projects at the ninth position, replacing Finland. The remaining positions are taken by Spain, Belgium, Netherlands, Poland, Russia and Ireland.
The capability to restore economic growth, competitive edge, the ability to nurture new-age companies and commercialize ideas for changing the lives of millions are a few reasons why European cities attract FDI, with London at the number one position, followed by Paris and Berlin. The top 10 includes three in Germany – Berlin, Frankfurt and Munich – as well as two cities in Spain – Barcelona and Madrid.
Central and Eastern Europe, Russia and Turkey account for more than half (52%) of Europe’s total jobs created by FDI – at 96,087 jobs – outpacing Western Europe.
Key sectors for FDI in Europe
An economic recovery, a depreciating euro and falling energy prices have all helped revive the appeal of manufacturing in Europe.
Taken together, they underpin a 20% surge in FDI manufacturing projects and jobs. Logistics operations, also blue collar, rose 27%, driven by this industrial resurgence and a boom in e-commerce.
Services had a mixed year: software projects (27% increase), financial intermediation (37% increase) and back-office operations (15% increase) all grow strongly while business services (24% decrease) and research and development (1% decrease) slide.
The biggest investors
Although European companies account for half (51%) of FDI projects into Europe itself and US multinationals a full quarter (25%), Chinese companies passed Japanese companies to become the fifth-largest FDI investors into Europe in 2014. With 210 projects, up by almost 40% from a year ago, Chinese investment into Europe shows the effect of the Chinese Government promoting outward investment as a means to acquire technology, brands and resources overseas to boost domestic high-value manufacturing and services.
How can Europe become the most attractive destination for investments?
The survey reveals 59% of investors are confident about Europe’s prospects in the upcoming three years, but only 32% of executives have plans to establish or expand operations in Europe over the next year, while 64% do not have any plans.
Investors suggest that to make the best of Europe’s economic resurgence and further improve the investment climate, policymakers should continue to remove impediments to business efficiency – such as excess bureaucracy and slow growth, which are still seen as major obstacles. Also, European countries need to further enhance labor market flexibility, simplify regulations and foster business-friendly environments.
A stable business environment, research and innovation capacity and its market are Europe’s top investment attractions. The digital, health care and energy transformations will drive Europe’s renaissance, once again becoming the most desired investment destination.