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Romania has enough resources to remain among world’s leaders in terms of economic growth in the next decade

The next decade could bring a significant economic boom in most countries in the world, Romania included, according to the 2021 Annual Report released by Colliers. While Romania is still behind the regional countries in terms of rule of law, transport infrastructure, healthcare, efficacy of public administration or stability in general, with regards to laws and policies, should any improvements take place on these fronts, the growth potential that would be unlocked would be significant, Colliers consultants predict. With good potential to generate steady, long-term income, capital appreciation and significant diversification benefits, the real estate segment still offers attractive long-term investment opportunities, especially for investors that can cope with lower liquidity.

In the past two decades, Romania’s GDP per capita increased from a level of 28% relative to the advanced economies to 58.6% in 2020. This c. 30 percentage points increase means it ranks 5th in the world in the 2000-2020 period, outpacing most regional economies and China, for instance, with Lithuania being the only other country in the CEE a bit ahead. Ireland, Singapore and Taiwan are also ahead. Furthermore, based on IMF predictions, Romania is also set to see one of the fastest recoveries post-COVID in Europe, extending the overperformance from the last decades.

There are also a few major trends that can move things around quite a lot in the Romanian economy, creating both opportunities for those with foresight and issues for those not prepared. Slightly more than half of Romania’s inhabitants live in urban areas, as per the UN’s definitions. Compare this to 80% in high-income countries and an average of nearly 70% in Eastern Europe and you get the prospect of a lot of fast-rising urban hubs in the next decades. This will create a lot of opportunities for various companies, including construction and real estate”, says Silviu Pop, Head of Research at Colliers.

A major opportunity which Romania should take advantage of relates to EU funds: the coronavirus aid package plus the normal allocation for the 2021-2027 period for Romania is around EUR 80bn or one third of the country’s GDP. After a decade and a half as a member of the European Union, Romania should be able to absorb all of these funds. As Romania has grown so well despite the lack of infrastructure, such investments would lead to major improvements, and this would unlock a significant and sustainable GDP growth. That said, some changes to taxation may be necessary in this context.

Considering high pressure on public finances and gaping budget deficits in the years to come due to COVID-19, it is increasingly possible that for a longer-term, the legislator may consider increasing the effective tax cost on properties. So, the favorable tax gap with more expensive countries may shrink over time”, explains Alex Milcev, Tax & Law Leader, EY Romania.

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Silviu Pop

Head of Research | Romania

Bucharest

Before joining Colliers mid-2017 as Head of Research for Romania, Silviu Pop worked with ING Bank for close to three years as an economist, covering macroeconomic/financial market themes for Romania, Bulgaria, Serbia and Croatia. His previous professional experience includes working almost 7 years as a financial journalist at various media outlets in Romania, including the sole business-oriented TV station in Romania, where he hosted a daily show for a period of time; during this interval,  he won a number of scholarships, including a stint with Reuters. He holds a BSc in economics at the Bucharest University of Economic Studies.

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THE NEW ROARING 20S | COLLIERS ROMANIA: REAL ESTATE MARKET OVERVIEW 2021
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