Investment in Romania and the EU - Page d'accueil...2017/06/21 · 2006 2008 2010 2012 2014 2016 2018 2020 GFCF - public sector as % of GDP Source: Eurostat / Ameco, European Commission

Investment in Romania and the EU

Debora Revoltella

Director

Economics Department

Bucharest

June 21, 2017

20/06/2017 European Investment Bank Group 2

Investment dynamics in RO


Source: Ameco Source: Eurostat

0

20

40

60

80

100

120

Investment Index 2008=100

European Union (28 countries) Romania

0

5

10

15

20

25

30

35

40

45

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Gross Fixed Capital Formation as % of GDP

Romania Private Investment Romania Public Investment

EU average (total GFCF)

Investment by sector


-20

-15

-10

-5

0

5

10

15

20

2013Q1 2013Q2 2013Q3 2013Q4 2014Q1 2014Q2 2014Q3 2014Q4 2015Q1 2015Q2 2015Q3 2015Q4 2016Q1 2016Q2 2016Q3 2016Q4

Annual percentage changes; contributions in percentage points, constant prices (2010)

Non-financial corporations Financial corporations

General government Households; non-profit institutions serving households

Total economy

Source: Eurostat

Public investment: Quantity and quality

counts


Source: IMF (2017)

Higher public spending than peers

with low quality of infrastructure

0 1 2 3 4 5 6 7

Quality of railroad infrastructure

Quality of roads

Quality of port infrastructure

Quality of air transportinfrastructure

Quality of transport infrastructure

EU RO

Rating based on survey by the WEF using a scale from 1 (extremely

underdeveloped) to 7 (extensive and efficient). EU value is

calculated as simple average

Better EU funds absorption could benefit

public investment recovery


Better Fund absorption could

improve potential growth

• Raising EU funds absorption rate to 95% for the current program period

could add one percentage point to potential growth

• EU-funded investment can raise quality

• Additional public investment in infrastructure could help to crowd in private

investment

0

1

2

3

4

5

6

7

8

2006 2008 2010 2012 2014 2016 2018 2020

GFCF - public sector as % of GDP

Source: Eurostat / Ameco, European Commission

Potential to (better) use EU funds remains


Source: EU Cohesiondata and ECB

0

10

20

30

40

Planned Decided Paid

Billio

ns

Slow implementation so far under current MFF (2014-2020)

Planned Decided Paid

0% 50% 100%

Cohesion Fund

EuropeanAgricultural Fund

for RuralDevelopment

European Maritimeand Fisheries Fund

European RegionalDevelopment Fund

European SocialFund

Youth EmploymentInitiative

Implementation by fund for Romania

(total costs) % of planned)

Planned

Decided

Paid

Planned: Total budget of the programme

Decided: Financial resources allocated to selected projects (project pipeline)

Paid: Expenditure reported by the selected projects

The financial data reporting is expressed in total costs only (i.e. not broken

down by the EU or national share).

-2

-1

0

1

2

3

4

2003 2005 2007 2009 2011 2013 2015

Balance of Member State vis-à-vis the EU budget

(net receiver+/payer-) (as % of GDP)

EIB Investment Survey (EIBIS)

• Annual survey commenced Q2 2016

• Some 12,500 firms surveyed across EU28 (of which 476 in Romania)

• Includes NFCs with 5+ employees operating in manufacturing, services, construction & infrastructure

• Representative of the economy (firms weighted by added-value)

• Provides qualitative and quantitative information on

• Firm characteristics and performance

• Investment needs and constraints

• Past investment activities and future focus

• Sources of finance


The share of Romanian firms investing is

rather low but, on balance, these expect to

slightly expand


Fir

ms e

xp

ectin

g to

in

cre

ase

/de

cre

ase

inve

stm

en

t in

cu

rre

nt fin

an

cia

l ye

ar

(ne

t b

ala

nce

,%)

Share of firms investing

Large

SME

Infr

Serv

Constr

Man RO

EU

SK

SI

ES

SE

UK AT

BE

BG

HR

CY

CZ

DK EE

FI

FR

DE GR

HU

IE

IT

LV

LT

LU

MT

NL PL PT

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

55% 60% 65% 70% 75% 80% 85% 90% 95% 100%

Low investment expanding High investment expanding

Low investment contracting High investment contracting

Firms’ investment: Mostly tangibles


Base: All firms who have invested in the last financial year (excluding don’t

know and refused response)

Q. In the last financial year, how much did your business invest in each of the

following with the intention of maintaining or increasing your company’s

future earnings?

0%

20%

40%

60%

80%

100%

EU

Ro

man

ia

Ma

nufa

ctu

rin

g

Co

nstr

uction

Serv

ices

Infr

astr

uctu

re

SM

E

La

rge

Organisation/business processes

Training of employees

Software, data, IT, website

R&D

Machinery and equipment

Land, business buildings and infrastructure

0% 20% 40% 60% 80% 100%

EU

Romania

Manufacturing

Construction

Services

Infrastructure

SME

Large

Capacity expansion Replacement

New products No investment planned

Base: All firms (excluding don’t know/refused responses)

Q. Looking ahead to the next 3 years, which of the following is your

investment priority (a) replacing existing buildings, machinery,

equipment, IT (b) expanding capacity for existing products/services

(c) developing or introducing new products, processes, services?

Low innovation activity – firms mostly

adopt


Investment in new products, process or services that are new to the company, new to the country or new to the global

market?

Romania: Larger investment gap than EU

average

17%

22%

24%

14%

19%

19%

19%

15%

0% 20% 40% 60% 80% 100%

Large

SME

Infrastructure

Services

Construction

Manufacturing

Romania

EU

Invested too much About the right amount

Invested too little Don't Know/refused


Base: All firms (excluding ‘Company didn’t exist three years ago’

responses)

Q. Looking back at your investment over the last 3 years, was it too

much, too little, or about the right amount to ensure the success of

your business going forward?

Net balance

-12 pp

-15.5 pp

-15.5 pp

-15 pp

-13.7 pp

-17.8 pp

-17.3 pp

-13.8 pp

0

10

20

30

40

50

State of the art equipment Energy efficient buildings

Lower quality capital stock for firms that invested too little

Firms that invested too little Firms that invested enough

Base: All firms (excl. don’t know and refused answers)

Q. Looking back at your investment over the last 3 years, was it too

much, too little, or about the right amount to ensure the success of your

business going forward?

Q. What proportion, if any, of your machinery and equipment, including

ICT, would you say is state-of-the-art?

Q. What proportion, if any, of your commercial building stock satisfies

high or highest energy efficiency standards?

In percent

Differences in (perceived) quality of capital

stock


0

10

20

30

40

50

State of the Art equipment Highly energy efficient buildings

Overall quality of capital stock ranked lower

EU average Romania

In percent

Base: All firms

Q. What proportion, if any, of your machinery and equipment,

including ICT, would you say is state-of-the-art?

Q. What proportion, if any, of your commercial building stock

satisfies high or highest energy efficiency standards?

0

10

20

30

40

50

State of the Artequipment

Highly energy efficientbuildings

Quality of capital stock less of an issue for foreign-owned

firms…

Domestic firm

Foreign owned firm

0

10

20

30

40

50

State of the Artequipment

Highly energyefficient buildings

…but notably for state-owned companies

Romania privatelyowned

Romania StateOwned

What are investment impediments?


Base: All firms (data not shown for those who said not an obstacle at all/don’t know/refused)

Q. Thinking about your investment activities in Romania, to what extent is each of the following an obstacle? (Major/minor/not at all)

0% 20% 40% 60% 80% 100%

Uncertainty about the future

Availability of finance

Adequate transport infrastructure

Business regulations

Labour market regulations

Access to digital infrastructure

Energy costs

Availability of staff with right skills

Demand for products or services

Long term barriers

1st bar: Romanian firms:

Red=Major obstacle,

orange=Minor obstacle

2nd bar: EU average for

comparison: Dark gray: Major

obstacle, light gray: Minor

obstacle

Increasing risks to investment from labour

market?


DESI Basic Skills and Usage sub-dimension calculated as the

weighted average of the normalised indicators: 2a1 Internet Users

(50%), 2a2 Basic Digital Skills (50%)

Source: European Commission

0 20 40 60 80 100

Luxembourg

Netherlands

Sweden

Estonia

Belgium

France

European Union 28

Slovakia

Latvia

Hungary

Lithuania

Cyprus

Greece

Poland

Romania

Basic Digital skills and web use

2a1 Internet Users 2a2 Basic Digital Skills

0% 20% 40% 60% 80% 100%

Water supply; sewerage; waste mgmt.;…

Construction

Manufacturing

Transporting and storage

Wholesale and retail trade; vehicle repairs

Accommodation and food service activities

All

Large

SME

A major or minor investment obstacle

Labour market regulations Availability of staff with the right skills

Base: All firms who have planned to invest in the current financial year.

Q. How do each of the following affect your ability to carry out planned

investment? (Positively/negatively/no difference)

• Low birthrates & external migration

• Unemployment (-), wages (++)

• Moving up the value chain find (and keep)

qualified staff

Problems with financing


0%

5%

10%

15%

20%

Received less Rejected Too expensive Discouraged

Base: All firms

Finance constrained firms include: those dissatisfied with the amount of finance obtained (received less), firms that sought external finance but did

not get it (rejected) and those who did not seek external finance because they thought borrowing costs would be too high (too expensive) or they

would be turned down (discouraged).

Access to finance is an issue for some

firms


PT

EL

HU

HR

CY

IR

MT

BG LT

RO

SL IT

LV

NL

SK

ES

UK

AT

DE

PL

BE

DK

FR

EE FI

CZ

LU

SE

0%

5%

10%

15%

20%

25%

30%

0% 2% 4% 6% 8% 10% 12% 14% 16% 18%

Sh

are

of

inve

sti

ng

fir

ms

th

at

are

ha

pp

y t

o r

ely

e

xc

l. o

n in

tern

al fu

nd

s

Share of investing firms that are external finance constrained

High availability of

internal sources;

high external

barriers

little availability of

internal sources; high

external barriers

high availability of

internal sources;

low external

barriers

little availability of

internal sources; low

external barriers

Base: All investing firms Finance constrained firms include: those that invested which dissatisfied with the amount of finance obtained (received less), firms that sought external finance but did not receive it

(rejected) and those who did not seek external finance because they thought borrowing costs would be too high (too expensive) or they would be turned down (discouraged)

Firms happy to use internal funds are those that invested using exclusively internal funds and who stated that they did not seek any external finance because they were satisfied with their

internal funds.

Access to Finance among Investing Firms

Financing (constraints)


• Romanian firms strongly rely on internal sources of financing (71%)

• Bank loans dominate external financing

• Firms want more of the same

Base: All firms who used external finance in the last financial

year (excl. don’t know/refused responses).

Q. Approximately what proportion of your external finance

does each of the following represent?

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

EU RO CESEE

Sources of external financing

Bank loan

Other bank finance

Bonds

Equity

Leasing

Factoring

Loans fromFamily/friends

Grants

Base: All firms who used external finance in the last financial year

(excl. don’t know/refused responses).

Q. How satisfied or dissatisfied are you with…?

0% 20% 40% 60% 80% 100%

Amount obtained

Cost of finance

Maturity

Collateral

Type of finance

Satisfaction with external finance

Very satisfied Fairly satisfied Neither

Fairly dissatisfied Very dissatisfied

Summary findings for Romania

• Still strong investment need

• Public sector GFCF EU funds

Project preparation and absorption

of structural funds

• Corporate investment outlook remains

moderate

• Issues with quality of capital and

differences between foreign and

domestic firms

• Business environment with constraints

Transport infrastructure

Skills

• Access to finance an issue for some

firms


0

10

20

30

40

50

60

70

80

90

100

(Weig

hte

d) Share

of firm

s

1st EU Quintile 2nd EU Quintile 3rd EU Quintile

4th EU Quintile 5th EU Quintile

Very small fraction of Romanian

firms compare to EU best

performers

Distribution of firms by productivity class

Thank you!



EIB Investment Research

Investment in Romania and the EU - Page d'accueil...2017/06/21 · 2006 2008 2010 2012 2014 2016 2018 2020 GFCF - public sector as % of GDP Source: Eurostat / Ameco, European Commission

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