Q: The first quarter of 2015 brought an unexpected GDP increase of over 4% compared to Q1 2014, exceeding the most optimistic estimates made by analysts and authorities. Do you think that is a trend that may continue for the rest of the year? Give us your personal opinion on the evolution of the Romanian economy in 2015.
Bogdan Ion: Romania’s economic performance in Q1 this year 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. State authorities need to take advantage of this period of improving economic conditions to cushion any short-term impacts from reforms, so that their long-term payoffs can be realized. Further labor market reforms, amendments to tax and benefits arrangements and entitlements, and regulation would all improve long-term growth prospects.
Q: Which are the main engines that could sustain a more important growth this year and beyond?
Bogdan Ion: 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.
Q: How have you perceived (if so) this positive evolution in your business? Have you noticed any positive developments/ trends? Or, on the contrary? Please, detail.
Bogdan Ion: There have definitely been positive evolutions in the past 12 months in our business. Apart from audit and taxation services, we have seen an important increase in the demand for consulting services. We have among our clients for various types of advisory services an important number of major companies leading important industry sectors from energy and utilities, oil and gas, to financial services, consumer products and industrial production. Our multi-disciplinary teams provide integrated and technology-enabled advice to help companies control costs, increase efficiency, evaluate opportunities and improve transaction outcomes.
Q: Which were the main events and trends that marked your industry and, in particular, your activity last year? How has the market changed? Which were the main drivers of your activity?
Bogdan Ion: There are six major trends shaping the business and social landscape today, but I will mention only two of them because they are most relevant for our activity in Romania.
Like many other industries, the industry of professional service is going through the digital transformation as well. The way we’re doing our work is supported greatly by technology and allows us to add significant value to our clients’ businesses. That creates a lot of synergy, because running through our organization is a strong sense of commitment to serve a number of different stakeholders who count on us to deliver quality and excellence in everything we do.
Another trend that has marked our industry is the global rising of entrepreneurship. At EY we’re at the forefront of this trend working with large entrepreneurs and family businesses for over 30 years. This has allowed us to have a deep understanding of the issues now facing the entrepreneurs and family businesses in Romania and we want to use our global reach and scale to convene the conversation about this topic to enable the development of strong entrepreneurial businesses and culture in Romania.
Q: Which are your expectations/ plans for 2015? Which are the main opportunities and risks in your industry?
Bogdan Ion: Increasing competitiveness through innovation and R&D, brand enhancement and digitalization need to be on the business agendas and in the investment budgets for 2015 and going forward. Furthermore, access to financing, the ability to diversify financing sources and optimizing financing costs have become competitive advantages to a greater extent. This is why any business strategy must take them into account in 2015. Finally, the improving financial and economic situation presents businesses in all industries with a key choice – do we invest for the future, or take profits now, possibly at the expense of longer term competitiveness? The balance between these two factors will be different across sectors, but could be tipped toward investment and job creation by further improvements in the business environment, both on the local market and within EU economies.
Q: How do you assess the current business climate (in every respect)? What has changed in the recent years? What are the main problems which you are facing?
Bogdan Ion: Romania has a superior FDI growth compared to the other European countries and is the sixth most attractive country in Europe by the number of FDI created jobs – exceeding Spain, Turkey and Slovakia. 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 highly-qualified and well-paid jobs, which can motivate Romanian specialists to stay in the country and create added-value here.