The economic situation of companies has deteriorated this fall, and most of them are pessimistic about the future, according to the results of a survey conducted by the Romanian-German Chamber of Commerce and Industry (AHK Romania) in October 2023.

The main reasons are the uncertainty caused by geopolitical risks and the decrease in demand due to high inflation rates and interest levels. Additionally, the lack of qualified personnel and the evolution of labor costs are also causes of concern for many companies.

The survey assesses both the economic situation and the business outlook of companies, providing an overview of the most important economic risk factors from the perspective of businesses. It also lists decisive factors in making investment decisions.

Only 17.1% of the interviewed companies expect Romania's economic situation to improve in the next 12 months, compared to 22% in spring. Meanwhile, 38% believe it will remain unchanged, and the majority (44.7%) think the economic situation will worsen (spring 2023: 26%).

Regarding the evolution of their own company's activity, most (46.1%) expect it to remain unchanged, while 17.7% anticipate a deterioration in their activity in the coming months (spring 2023: 15.9%). The number of companies expecting an improvement in their business situation has decreased, with only 34.2% (spring 2023: 46.2%) remaining optimistic.

All of these factors have led to a reduction in investment plans, and the intention to hire new employees has also decreased. Over 30% of respondents state that they will reduce investments (spring: 24.4%). Thus, the volume of investments remains unchanged for 38.2%, while 6.6% of surveyed companies do not plan any investment for the next 12 months.

Only a quarter of respondents still plan to increase local investments (spring 2023: 39.7%). It is also important to see in which areas German companies in Romania are making significant investments and what decisive factors play a role in this regard.

Most (47.7%) of those considering investments plan to invest in production and manufacturing, as well as sales and marketing. Research and development activities are also considered by 22.3% of respondents.

The size of the market and proximity to customers are the most important factors influencing investment decisions.

Romania, with its 19 million inhabitants, EU membership, and proximity to Western Europe, remains a good option for German investors.

The number of employees remains constant for the majority of companies (fall 2023: 57.3%, spring 2023: 42.4%), but the number of companies willing to make new hires has significantly decreased (fall: 26.7%, spring: 41.7%).

German companies in Romania consider low demand for products and services (63%) and a lack of qualified personnel (61%) as the biggest risks. Labor costs (51%) and political-economic framework conditions (43%) also cause concern among respondents.

In addition to the response options, companies had the opportunity to indicate other factors that play a decisive role in local investments. They mentioned the lack of predictability due to frequent legislative changes, such as modifications to the tax code, international economic and geopolitical situations, and a sudden decrease in demand from their customers.

"Despite all the challenges and risks, the prospects for German companies in Romania and for bilateral economic relations are good, and I believe that Romania will continue to attract new investments.

However, as the results of this survey once again show, this requires a favorable, competitive, and above all, predictable economic environment," said Sebastian Metz, General Manager of AHK Romania.

The results of the global survey, coordinated by the German Chamber of Commerce and Industry (DIHK), conducted among over 3,600 German companies operating abroad and companies closely linked to Germany, show that there is no strong global recovery in sight, as the global economy has slowed down during the year.

As a result, German companies are less optimistic about the economic development in their international investment locations in the fall of 2023 than they were in spring.

In Europe, expectations regarding economic development are negative and have significantly worsened in some cases compared to the previous survey.

At 46%, low demand is currently perceived as the biggest global business risk, followed by economic policies (42%) and a lack of qualified personnel (37%). "The decrease in demand from China and geopolitical risks have a negative impact on the businesses of German companies globally," says Volker Treier, Head of the Foreign Trade Department at DIHK. 

The "AHK World Business Outlook" survey was conducted from September 25 to October 20, 2023. The conflict in the Middle East, which broke out on October 7, did not have a significant impact on the expectations of companies during the survey period.

76 companies from Romania participated, with more than half (54%) operating in industry and construction, 30% in the services sector, and 16% being trade companies.