ROEDL & PARTNER ROMANIA

 | 

ANCA SUCALA

  |  2017-01-13

An insight into the professional services market in 2016

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ROEDL & PARTNER ROMANIA


ANCA SUCALA

ANCA SUCALA

PARTNER at ROEDL & PARTNER ROMANIA


Although the IMF estimations for this year regarding the evolution of consumer prices in Romania have been updated from minus 0.4 percent in April to minus 1.5 percent at present, placing Romania among the top positions in Europe in respect to the negative average of annual inflation, for 2017, the IMF expects a positive consumer price index in Romania, registering an increase of 1.7 percent.


We also consider the growing potential of other important regions in Romania, development opportunities that can have a significant contribution in reducing regional disparities and encourage interregional competitiveness. We take for example Cluj–Napoca, which has always been an important destination for foreign investors, being among the top cities in Romania to do business in and increasingly attractive in terms of real estate.


4. From your own/ your clients’ experience, which economic sectors – from the ones mentioned above – will register growth in 2017?


Apart from the IT sector, which over the past years has proved to be a constant driver of Romania’s economic growth, agriculture and public investments are going to be under close scrutiny next year, since they can generate a substantial amount of sustainable growth over the next years. Plus, we consider that the automotive industry, one the most important engines of economic growth, will most likely continue to consolidate. We also appreciate that the real estate market in Romania will go forward with its positive trend. Services and industry are likely to generate the most significant contribution to the real growth of the GDP for this and next year.


5. As we have witnessed a large decrease in the VAT rate in Romania in 2016, how would you characterize this measure: opportunistic, required, unnecessary or mandatory? Please explain your option.


The new and differentiated VAT rate for food products and non-alcoholic drinks was one of the biggest retailing events of the past years in Romania, as it has been reduced from 24% to 9%, enforced starting the 1st of June. Along with other tax changes, the 1st of January 2016 also marked the decrease in the general VAT rate, from 24% to 20%.


Since the previous rate was intended as a measure to increase public revenues during the economic crisis, the recently decreased rate aims to support domestic consumption and the overall economic growth in Romania, but also to support electoral strategies, considering the two series of elections in 2016 (local and legislative). Moreover, 2017 is expected to bring an additional VAT rate reduction, decreasing the tax to 19%, back to the rate applied in 2010, before the original increase.


The previously mentioned tax reduction from 24% to 20% has been heavily covered by the media in 2015, as Romania applied one of the highest VAT rates in Europe. This lead to growing consumers’ expectations, but through the perspective of the macroeconomic environment of Romania, it is believed to have minimal effects and to be less significant than desired.


Non-grocery products registered a 3% drop in the retail price, reflected in the new values displayed by retailers in early 2016 and welcomed by customers, however it has had an insufficient effect in changing buying habits, with an insignificant influence in consumer migration to higher priced products or even in consumption increase.

 

6. Real estate is one of the business sectors you are supporting. How do you perceive this sector in 2016 and what are the perspectives for 2017?


As we already mentioned above, the real estate market has recovered and will continue the positive evolution. According to the CBRE Romania report, for the first half of 2016, the investments in this sector registered the highest level of the last 5 years. Moreover, it is noted that, for H1 2016, the total investment volume was over EUR 359 million, compared to approx. EUR 107 million, registered in the same period of 2015. Investment, office and industrial markets are expected to have a significant growth.


The highlight of 2015 was the investment market, which registered a significant revival in transactional activity for the first time after the crisis, showing an increased investment interest in Romania through new market entries and solid transactions. The outsourcing sector dominated the office segment, as local market opportunities attracted companies to enter the market or to develop their activity.

 

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