​Stable and predictable are two words that we hear most often from companies, investors, entrepreneurs, and not today, not yesterday, since the public space was disturbed by the government’s tax package, but for many years. If we look back 5 or even 15 years ago, we will have the impression that nothing has changed, that we have remained in the same paradigm of unpredictability, uncertainty and surprise. And surprises are not to the liking of businesses, because they work with strategies and plans in which they try to calculate risks and threats as much as possible, as well as take advantage of opportunities. But is it true that nothing has changed? Working in the field of consulting, a great privilege is, first of all, that I am always in contact with people and companies from different industries, with local and international institutions, financiers or investors, and I can learn directly from them what their worries how they see their future and development, but also why I fear more.

By being at the center of this constant exchange of ideas and experiences, the advantage is that it becomes easier to form a perspective on the context in which we are and the direction in which we are moving. As we are constantly under the pressure of change naturally associated with progress, any new dangers, and above all a potential crisis, increase fears and reduce confidence, and in the last two or three years the complexity of the problems, the pace at which those that arose and had to be resolved were huge. Added to all this is the macroeconomic uncertainty and instability that manifests itself at the global level, but especially at the local level. And coming back to the question, after this parenthesis, it is not true that nothing has changed. At the same time, it is true that significant positive changes have occurred mainly thanks to workers, entrepreneurs and companies, and unfortunately, they are happening too slowly in almost all areas of the public sector.

Although Romania’s economy still has decades-long unresolved structural problems related to politics and public administration in particular, and solutions exist, their implementation has been delayed. As I said earlier, and as many economists and government representatives have said, the National Recovery and Resilience Plan came with very generous funding, but also with a combination of reforms that address the deficiencies that we have had for decades on the one hand, and on the other side on the other hand, they offer a new development model focused on the digital and ecological. But the speed of implementation of the reforms indicates that the political will is not fully involved in the implementation of this plan, and the “hype” of measures in recent weeks aimed at consolidating public finances does not seem to be consistent with the staged, predictable and transparent application of reforms from the PNRR, but again still represent local “innovations” that are as surprising as they are likely to fail.

So we come back to what we said at the beginning about stability and predictability. Business is scary, especially in these uncertain times, when the world’s largest economies rely more on the support of loved ones/friends and less on globalization due to severe supply chain problems caused by the pandemic and the war in Ukraine. In addition, energy prices, high inflation and increasingly expensive financing added to the stress. For Romania, the relocation of business, the investment of the European Union through NextGenEU (local PNRR) to help member states’ economies to change their position both in global supply chains and to produce energy less dependent on Russia, is important. profitably.

We can already see that this year, even if it grew less than predicted, Romania’s economy has advanced thanks to European funds that finance large infrastructure construction projects. In practice, it has been the main engine of economic growth and may continue to be so if PNRR commitments are met.

Otherwise, European funds have made a significant contribution to closing the gap with the EU average, with average returns rising from around a third of the EU average to more than 70% since accession. Over the same period, Romania’s gross domestic product (GDP) doubled, taking four positions in the European ranking, reaching 12th place out of 27 countries last year.

Therefore, if we look at the prerequisites for development given by the geopolitical context in which we find ourselves, the prospects are very optimistic. If we look at the domestic context, in addition to administrative capacity and political will to implement reforms, several factors may cause concern.

From the perspective of companies, apart from macroeconomic instability, the biggest problem is the labor situation. Several million active people who probably left Romania for good, the birth rate, the quality of education, the large number of inactive people are all reasons for concern. Other sources of concern are the digitization of institutions, as well as the introduction of the Internet and digital skills at the level of the entire population, the quality of public services in general, which worsens the quality of life of many citizens.

In summary, we are living through a period of great macroeconomic instability and change in the global economy. The global economy and its poles of power will likely look very different in the next ten years. Romania is in a favorable place on the map, although it is threatened by war.

Based on these coordinates, companies should consider the potential of investing and creating value for themselves and society. It is obvious that digitization, green transition, and sustainability are pillars for the business of the future. The government should support these directions with its decisions and policies, increasing administrative capacity and strengthening public finances.

In turn, companies must have the right mindset for volatile times. I can no longer have the same approach as I did 3-4 years ago, because that would be wrong and lead to procrastination and inertia. Those who intend to emerge from these unstable times, armed with new business models, are betting on transformation, focusing only on the characteristic activities that ensure productivity in the new context.

Transformation, adaptation to change – in any case, the future will belong to enterprises and states that know how to create value, focusing on digitalization, green energy, equipping employees with skills adapted to new trends. In essence, progress is impossible without change, and change has always been present in all ages. The only difference is the pace at which it is happening now. It has been debated with a lot of passion lately, and certainly these heated discussions will continue, and somewhere we understand why, but clear and informed decisions cannot be made in the heat of the moment. I encourage you to look at the economic and business context with the necessary calm, and in the coming weeks, together with my colleagues, we will discuss in a series of articles the context and perspectives that can guide businesses to make informed decisions in the midst of change.

The article was signed by Dina Bumbeca, managing partner of PwC in Romania

Read more articles on the PwC Romania blog.​

Article supported by PwC Romania