Moments and sketches of economic evolution

Moments and sketches of economic evolution

Romania’s economy grew in 2017. Government incresed the wages and pensions. The public investments declined. The European Commission reviewed negatively country’s growth forecasts for 2018. But the Government has communicated to the population about an unprecedented growth. Imports have increased as have the consumption of the population. The National Bank has limited the indebtedness level of the population. The ROBOR index has risen, along with the prices and interests. The LEU has depreciated due to a volatile exchange rate, which has led to repeated interventions by the National Bank. Companies have a pessimistic business outlook due to the lacking labor force, low productivity, and rising costs. This is the sketch of the economic evolution in Romania for the last two years.

Beyond the carnival, interpretation, nuances, ideological affinities and social turmoils, the Romanian companies’ decision-makers have been asked what is their business outlook for 2018. Their opinion, expressed in the second part of the year, was summarized in the research „Business outlook in Romania 2018” conducted by the consulting company Valoria. The indicators that general managers were asked about are the following: turnover, profits, investments, staff numbers, wages and the main challenges and opportunities.

Moments and sketches of economic evolution - 1

Prospects for business growth in 2018

In the second half of the year, 12% of the CEOs, compared to 8% previously, said they would have an increase in the company’s turnover of more than 30%. It also increases from 7% to 16% the percentage of CEOs expecting a decrease in their company’s turnover this year. However, the majority of CEOs (26% -27%), both in the first part and in the second part of the year, expect higher turnover by 5%-10% in 2018.

Profits, though, grow marginally or decrease

Profit forecasts for the second half of 2018 are more pessimistic than those at the beginning of the year. Although 20% of CEOs (up from 13% previously) expect their profit to grow by 10%-20% this year, we see 14pp and 2pp decreases in the percentages of top executives who forecast a profit growth of 1%-5% and respectively of 5%-10% in 2018. It also increases from 9% to 19% the percentage of CEOs who say that the profits of the companies they run will be lower this year than last year.

Investments are reduced or postponed

According to research results, in the second half of 2018, 29% of CEOs say they will not increase investment, compared to 27% in the first half. Even if 48% of decision-makers want to increase their investment by 1%-10% versus 37% previously, only 11% of companies say they will increase investment by 10% to over 20% in the second half of 2018, compared to 19% at the beginning of the year and still less (7%) will increase investment over 30% in the second half compared to 11% in the first semester.

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