The National Bank of Romania and the European Investment Bank (EIB) held today a joint conference on Investment and Investment Finance in Romania, presenting the main results of the study conducted by the EIB:
- Investment gaps persist despite the strong – but mainly consumption driven – growth in recent years;
- Investment activity in Romania remains one of the lowest in the EU: Only 71% of firms invested in the last financial year, compared to 85% EU-wide;
- Uncertainty about the future, transport infrastructure and the limited availability of skills are the most significant barriers to investment;
- Most Romanian firms remain far from the EU productivity frontier and there are few leaders. Productivity differences among Romanian firms are pronounced, with many firms remaining low performers and only 14% succeed to upgrade significantly their productivity;
- Romania needs to invest in productivity improvements through new technology and innovation to avoid low competitiveness trap and boost the green transition.
Debora Revoltella, Director of the EIB’s Economics Department, presented the new 2019 results of the annual EIB Investment Survey (EIBIS), which, together with the EIB Investment Report, provides an overview of the cyclical and structural dynamics behind investment and investment financing in Europe.
EIB Vice-President Andrew McDowell, commented: “The survey, which is conducted across Europe including Romania, provides the EU bank with a powerful policy tool to understand where and what type of support is needed and how the EIB can bring real value to the economy and people. The EIB, as the EU’s climate bank, is the natural partner of Romania supporting the country’s shift towards a low-carbon economy and sustainable growth.”
The Governor of the Romanian National Bank Mugur Isarescu stated:“As a veteran, in office since 1990, I am fully aware to what extent Romania has benefited from the significant support provided by the European Investment Bank. The projects financed by EIB proved to be a catalyst for development, with a multiplier effect in all the economic sectors.”
The conference featured a broader debate on investment needs and barriers, the availability of financing sources for investments, in particular the use of EU funds and the role of EIB financial instruments in supporting long-term investment. Moreover, the discussion focused on the productivity gap between leaders and laggards, and how Romania could transition to a low carbon economy and higher efficiency.
The EIB Group survey on Investment and Investment Finance – in the case of Romania – provides unique insights into Romanian firms’ investment activity, their plans and views on what holds back investment. The EIBIS reveals that the perceived investment gap – expressing the share of firms that did not invest enough in recent years - remains above the EU level. This confirms the low investment rate on the macroeconomic level and lower quality of assets. The average share of state-of-the art machinery and equipment and of energy-efficient building stock are still lagging the EU average.
Following contraction of investment activity in 2018, investment growth accelerated in 2019 and corporate expectations improved. However, the macroeconomic environment ahead is bound to become more challenging, with growth moderating and a worsening fiscal outlook. Even with limited fiscal space, reprioritising public investments against current expenditures and higher fiscal predictability would help crowding-in private investment necessary for the transition to green and smart.
Firms’ investment remains focused on capacity expansion and tilted towards tangibles. More than 76% of investments are for tangibles (EU 63%). Conversely, investment in R&D and other intangible assets is lower. A closer look at firms’ innovation activity in Romania shows that among the innovators, a higher share rely on adoption rather than development. Also, Romanian firms lag behind EU peers when it comes to the adoption of key digital technologies. “EU overall is missing the global leaders in new sectors and similarly, Romanian firms lag in innovative sectors. Creating the proper business environment and improving access to finance for start-up and scale-up firms is one of the best way to create leaders, boost innovation and productivity” according to Debora Revoltella, Director of the EIB’s Economics Department.
Around one in ten firms face finance constraints, and reliance on internal financing sources remains high. Access to finance is more of an issue in Romania than in other EU countries and firms catching up to the productivity frontier face even greater difficulties in successfully tapping external financing. Uncertainty about the future, the lack of transport infrastructure and skills are the main barriers for businesses in Romania.. Finding people with the right skills is particularly a challenge for companies trying to catch up to the productivity frontier.
This country overview presents selected findings based on interviews with 482 firms in Romania in April-August 2019. The survey is part of the annual EIB Group Survey on Investment and Investment Finance (EIBIS), an EU-wide survey of 12 500 firms that gathers quantitative information on the investment activities of both SMEs and larger corporates, their financing requirements and the difficulties they face.