Money Buzz! Europa

Category: Economy

  • Political and environmental risks are the main threats for businesses in 2020

    Political and environmental risks are the main threats for businesses in 2020

    As Coface launched the 2020 edition of its Country & Sector Risks Handbook, Chief Economist Julien Marcilly presented the main threats for the global economy in 2020.

    The US-China trade agreement will not be enough to rekindle international trade

    With 2019 being marked by a rise in protectionist rhetoric (more than 1,000 measures implemented worldwide) and the first decline of global trade in ten years, Coface anticipates that international trade will grow by only 0.8% in 2020.

    The truce trade agreement between the United States and China is unlikely to restore corporate confidence or significantly boost industry and world trade, especially as only 23% of the protectionist measures taken between 2017 and 2019 affect the United States or China. The rise in protectionism is therefore a global and lasting trend that to which companies will need to adapt.

    Global growth, which already shrunk by 0.75pp last year due to these trade uncertainties, is not expected to recover this year: 2.4% after 2.5% in 2019. Coface expects corporate insolvencies to increase in 80% of the countries for which forecasts are issued this year, including United States (+3% in 2020), the United Kingdom (+3% in 2020, after a cumulative increase of 17% since the June 2016 referendum), Germany (+2%) and France (+1%). Overall, Coface anticipates a 2% increase in insolvencies worldwide, in line with 2019.

    Sectors: metals suffering; construction in good shape

    Uncertainties related to the protectionist environment also contribute to the volatility of commodity prices, particularly those of agriculture, metals, and oil. Steel prices will continue to fall over the next six months, penalizing companies in the sector, especially as growth in China – which accounts for half of global steel demand – is expected to reach only 5.8% this year. Therefore, the metals sector risk assessment has been downgraded in 5 countries, including the United States and Italy.

    Moreover, the sustained low level of oil prices, despite geopolitical uncertainties (USD 60 per barrel of Brent on average in 2020 after USD 64 in 2019) will hurt some indebted producers, notably in the United States.

    On the bright side, the construction sector is benefiting from highly expansionist monetary policies: its assessment has been upgraded in 4 countries (including Brazil and Turkey). In total, Coface downgraded 22 and upgraded 8 sector assessments this quarter, reflecting the significant increase in risks for the economy.

    In 2020, companies will mainly face non-economic risks

    The end of 2019 saw an increase in social tension “trouble spots” around the world, with varying levels of intensity. This underlying trend was strongly anticipated by the Coface Political Risk Index, published at the beginning of 2019 and at an all-time high.

    In 2020, this indicator forecasts a high level of social risk in several countries in Africa, the Middle East, Central Asia, and even Russia.

    Since 2019, social discontent has also manifested in increasing demands for environmental protection. Environmental risks have a wide range of effects on corporate credit: greater frequency of physical risks (natural disasters arising from climate change), but also transition risks (new and more stringent regulations, changes in consumer standards).

    For the latter, the effects of stricter anti-pollution regulations for the automotive sector in India or in global shipping must be monitored this year. Coface pays close attention to the analysis of these two categories of environmental risk.

    Emerging economies: sovereign risk is back in the spotlight

    Growth in emerging economies should accelerate slightly this year (3.9% versus 3.5% in 2019). However, public debt has reached a historically high level for these countries and is increasing in all regions except Central and Eastern Europe.

    In Latin America, the level of indebtedness is higher than at the end of the 1990s, which was a period marked by recurrent debt crises. In Africa, public debt is close to the level observed around fifteen years ago: a period of debt write-offs by international and bilateral donors. For companies in these regions, this means that government and large State-Owned Enterprises (SOE) arrears are likely to increase this year. The only good news is that the structure of emerging countries’ sovereign debt is generally more favourable than twenty years ago, since 80% of it is now denominated in local currency.

    In this delicate and volatile environment where economies are facing headwinds, 4 country assessments have been downgraded (Colombia, Chile, Burkina Faso and Guinea), while 6 have been upgraded (Turkey, Senegal, Madagascar, Nepal, Maldives and Paraguay).

  • Romania’s M&A market shows strong growth, KPMG survey reveals

    Romania’s M&A market shows strong growth, KPMG survey reveals

    Stakeholders expect a further increase in Mergers & Acquisitions (M&A) activity in Romania in 2020 after one of the most successful years in the last decade. The first edition of a new KPMG publication The M&A Landscape in Romania shows investor confidence is continuing to build up, supported by the GDP growth trend and favorable geopolitical position in the region.

    Romania has become a significant investment destination, over the last 15 years, for both strategic and financial investors. Buyers find M&As to be a useful strategy to seize the moment in a rapidly growing environment, while sellers try to realize the value that has been built up in local companies.

    We expect to see another busy year as positive sentiment is fostered by sustainable economic growth and increased attractiveness of Romanian targets, which are strengthening their market position and are opening new development opportunities through regional expansion. Furthermore, Romanian entrepreneurs, in their quest for growth, continue to be faced with a buy versus build strategy and have begun to consider M&As as an integral part of their strategy.

    In the context of a booming global M&A market, our survey found a strong sense of optimism at the national level, with 67% of respondents expecting high levels of M&A activity in Romania to continue over the coming months. Sectors such as technology, healthcare and energy are expected to be particularly attractive.

    The study shows that buyers are worried about substantial differences in price expectations and global macroeconomic uncertainties. At the same time, investors consider that target readiness has a material impact on deal making.

  • The total number of cars in use in Europe will decline by 2025

    The total number of cars in use in Europe will decline by 2025

    The total number of cars in use (parc) in Europe is forecasted to grow with 1,4% by 2025, at 273 million, from 269 million cars this year, and to decline thereafter with 5,4% by 2030, due to increase of shared mobility & integrated mobility platforms (ex. Uber, Clever, Bolt) and alternative car ownership models, according to PwC Digital Auto Report.

    PwC report gives as example Germany, where the share of people who own a car has dropped from 43% in 2010 to 36% in 2018, while car fleets, whether owned by companies, rental companies or mobility platforms, increased over the same period from 57% to 64%. It is a trend that is expanding more and more globally and has already increased price pressure, due to the negotiating power of professional customers.

    According to the report, in Europe, 74 percent of consumers opt for the most convenient way of travelling, including using more than one mode of transport and 28 percent of European vehicle owners could imagine earning money from sharing their car via a peer-to-peer platform.

    Also, over 50 percent of consumers would be willing to pay up to USD 250 for a monthly subscription for unlimited rides within town. A similar percentage (47%) of European consumers would consider giving up their own car in favor of widely available and adequately priced autonomous robotaxi services.

    In Europe, the total value opportunity of alternative ownership will increase from USD 33 billion in 2018, to USD 191 billion in 2025 and USD 393 million in 2030. Globally, new mobility models are expected to account for 17 – 28% of vehicle-based mobility globally by 2030.

    Other conclusions of the report

    • The future of the automotive industry will be characterized by connectivity – increasing the number of 4G and 5G connected vehicles, electricity – increasing the share of electric vehicles, sharing – increasing the share of car-sharing and autonomy – autonomous cars.
    • The number will continue to increase in China, over 33% to 303 million cars by 2025 and at a slower pace in the US, by 2,2%.
    • It will be necessary to improve the transport, telecommunications and power infrastructure of electric cars.
    • Electric powertrains and automated features could increase the Bill of Material (BoM) by between 20 and 40 percent by 2030.
    • In this context, there will be a significant shift in producers and suppliers’ business models, which will make intense efforts to reduce the technological costs in the next decade.  
  • CEO pessimism over global growth in 2020 reaches record high

    CEO pessimism over global growth in 2020 reaches record high

    CEOs are showing record levels of pessimism over the 2020 global economy growth, according to PwC’s 23rd CEO Global Survey launched at the World Economic Forum Annual Meeting in Davos, Switzerland.

    The percentage of those predicting a slowdown in the global economy is the highest since we started asking this question in 2012. Thus, 53% are predicting a decline in the rate of economic growth in 2020, up from 29% in 2019 and just 5% in 2018. At the same time, the number of CEOs projecting a rise in the rate of economic growth dropped from 42% in 2019 to only 22% in 2020. 

    “Given the lingering uncertainty over trade tensions, geopolitical issues and the lack of agreement on how to deal with climate change, the drop in confidence in economic growth is not surprising – even if the scale of the change in mood is,” said Bob Moritz, Chairman, of the PwC Network.

    CEO pessimism over global economic growth is particularly significant in North America, Western Europe and the Middle East, with 63%, 59% and 57% of CEOs from those regions predicting lower global growth in the year ahead. In contrast, the most optimistic are Central and Eastern Europe (CEE) CEOs, 43% of them predicting a decrease in the growth rate.

    CEOs are also not so positive about their own companies’ prospects for the year ahead, with only 27% of CEOs saying they are “very confident” in their own organisation’s growth over the next 12 months – the lowest level we have seen since 2009 and down from 35% last year. 

    While confidence levels are generally down across the world, there is a wide variation from country to country, with China and India showing the highest levels of confidence among major economies at 45% and 40% respectively, the US at 36%, Canada at 27%, the UK at 26%, Germany at 20%, France 18%, and Japan having the least optimistic CEOs with only 11% of  CEOs very confident of growing revenues in 2020.

    Analysing CEO forecasts since 2008, the correlation between CEO confidence in their 12-month revenue growth and the actual growth achieved by the global economy has been very close (see exhibit4 in notes). If the analysis continues to hold, global growth could slow to 2.4% in 2020 below many estimates including the 3.4% October growth prediction from the IMF.

    Top concerns in 2020: Excessive regulation, trade conflicts and uncertain economic growth

    In 2019 when asked about the top threats to their organisations’ growth prospects, uncertain economic growth ranked outside the top ten concerns for CEOs at number twelve. This year it has leapt to third place, just behind trade conflicts – another risk that has risen up the CEOs agenda – and the perennial over-regulation, which has again topped the table as the number one threat for CEOs. 

    Policing cyberspace

    Globally over two-thirds of CEOs believe that governments will introduce new legislation to regulate the content on both the internet and social media and to break up dominant tech companies. A majority of CEOs (51%) also predict that governments will increasingly compel the private sector to financially compensate individuals for the personal data that they collect. 

    The upskilling challenge

    While the shortage of key skills remains a top threat to growth for CEOs and they agree that retraining/upskilling is the best way to close the skills gap, they are not making much headway in tackling the problem with only 18% of CEOs saying they have made “significant progress” in establishing an upskilling programme.

    Climate change – challenge or chance?

    Although climate change does not appear in the top ten threats to CEOs’ growth prospects, CEOs are expressing a growing appreciation of the upside of taking action to reduce their carbon footprint. Compared to a decade ago, when we last asked this question, CEOs are now twice as likely to “strongly agree” that investing in climate change initiatives will boost reputational advantage (30% in 2020 compared with 16% in 2010) and 25% of CEOs today compared with 13% in 2010 see climate change initiatives leading to new product and service opportunities for their organisation. 

    PwC’s 23rd Global CEO Survey was conducted among almost 1,600 CEOs from 83 countries across the world.

  • The demand for electric cars is growing, but consumers are reluctant

    The demand for electric cars is growing, but consumers are reluctant

    Electric vehicle demand is growing fast in the European Union due to supportive environmental policies, big-brand bets and shifting consumer attitudes, according to the latest Deloitte Automotive Consumer Study conducted in Europe.

    Italians are the most interested in cars equipped with alternative powertrain technology, 58% (up from 51% last year) of them saying they are considering such a system for the next vehicle they will purchase. On the other hand, the largest increase in interest for electric and/or hybrid cars was registered in UK, from 27% in 2018 to 37% in 2019.

    What about Romanians

    ”The Romanian Ministry of Environment has implemented a stimulation program for the acquisition of electric and hybrid cars and every year we saw an increase in the consumers’ preferences for this type of cars. 5,283 hybrid and electric cars were sold on the Romanian market in the first ten months of 2019, up by 50% compared to the same period of 2018, according to data from Automotive Manufacturers and Importers Association. However, their number remains low in Romania, as they are still expensive for most Romanians,” said Ciprian Gavriliu, Transfer Pricing Partner, Deloitte Romania, and Automotive Industry Leader.

    At the same time, consumers’ trust in autonomous vehicles appears to be stalling, after a significant increase in 2018, according to the study. As the technology gets ever closer to scalable, real-world application, consumers are questioning if autonomous vehicles are safe, which is causing some people to take a more cautious approach to the idea.

    This situation could be explained by a series of negative incidents involving autonomous vehicles, said the study’s authors.

    What consumers want?

    The majority of consumers want their governments to exert a significant amount of control over the development and use of autonomous vehicles. An overwhelming percentage of consumers in most European countries (but not only) indicated they wanted “significant oversight” (from 58% in Austria, to 73% in the Netherlands).

    When it comes to vehicle connectivity, consumers’ opinion is split. Italians are embracing the idea (60%) at roughly twice the rate compared to Germans (35%) and Austrians (29%). Consumer opinions also vary depending on specific concerns around connectivity, including the security of biometric data generated and shared by connected vehicles.

    The European Deloitte Automotive Consumer study questioned over 9,300 consumers in seven countries: Austria, Belgium, France, Germany, Italy, the Netherlands and the United Kingdom.

  • PwC: Global economic growth in 2020, a modest rate of around 3.4%

    PwC: Global economic growth in 2020, a modest rate of around 3.4%

    Global economic growth in 2020 is expected to grow at a modest rate of around 3.4% compared to its long-term average of a 21st century average of 3.8% per year, according to new projections by PwC.

    PwC forecasts that the global economy will advance from inertia, as long as trade tensions continue to create challenges for global supply chains and further integration of the global economy.

    Nevertheless, PwC expects that services will remain a bright spot for global trade, with the total global value of service export forecast to hit a record $7 trillion in 2020.

    ”Globalisation has been a defining feature of the global economy since the 1970s. Yet the global volume of merchandise traded slowed down dramatically and even went into reverse in 2019. Coupled with the effective disbandment of the World Trade Organization’s (WTO) dispute settlement mechanism in December, we can expect more challenging times ahead for global trade”, Barret Kupelian, senior economist at PwC UK, says.

    PwC forecast for Romania

    “All the forecasts for Romania, including the most optimistic of 4.1% belonging to the government, indicate a slowdown of the economic growth for this year compared to the previous years, in line with the trend of the global economy. Therefore, a stable and predictable legislative framework, as well as public investments, especially in physical infrastructure could contribute to the economic activity. Unfortunately, the low level of budget revenue as a share of GDP and the rapid pace of increase in current state spending put pressure and limit the role of fiscal-budgetary policy in stimulating economic growth. In 2020 and even more in the coming years, there should be a consolidation of public finances by improving tax collection and recalibrating public spending to create a favorable investment climate”, Ionuț Simion, Country Managing Partner PwC Romania, says.

    Major economies will continue to grow in 2020

    In the main scenario, PwC expects all of the major economies to grow. US economic activity is likely to expand by around 2%, in line with its potential rate.

    The Eurozone is expected to grow at approximately half that rate (i.e. around 1%). Germany, and other economies that are sensitive to global trade flows, to become more reliant on household consumption as a source of growth instead of net exports and investment.

    In the emerging world, we expect the Chinese economy to expand by less than 6%. According to the IMF’s latest estimates, 2019 was the year when India overtook the UK and France to become the fifth largest economy in the world.

    This is an ongoing process with India likely on current trends to overtake Germany before 2025 and Japan before 2030 to become the world’s largest economy behind China and the US.

    More jobs across the board but not necessarily spread equitably

    PwC expect the G7 to continue to create jobs, to the tune of around 2 million. Four out of the five new jobs in the G7 will be created in the US, UK and Japan. As the pool of labour resources in the G7 gradually dries up, earnings will continue their upward trajectory. But in the absence of productivity improvements, corporate profit margins could be squeezed.

    Global population biggest it has ever been but also the greyest

    In 2020, the world’s population is expected to reach 7.7 billion, which is around a 10% increase compared to a decade ago. China, India and Sub-Saharan Africa are expected to drive around half of the world’s annual population increase. At the same time, the number of people above the age of 60 globally is expected to surpass the one billion mark.

    Further predictions for 2020

    • As a further sign of the increased levels of automation across most industries, we expect the operational stock of robots to exceed the 2.6 million mark in 2020.

    • More than half a billion people are expected to live in the 30 largest cities of the world. According to the UN, Tokyo is expected to be the largest city in the world in terms of population, followed by Delhi and Shanghai.

  • Half of job seekers are willing to trade a part of their salary for flexibility

    Half of job seekers are willing to trade a part of their salary for flexibility

    Job seekers are willing to trade an average of 11.7% of their salary for flexibility and more than a third of candidates said they’d be willing to take a pay cut for a chance to learn new skills, according to a PwC US survey ”The future of recruiting”.

    That figure rises to 12.4% among those working in in-demand fields like technology.

    ”Salary and benefits almost always come first for job seekers. Lately, there’s been a global tendency to give up a part of remuneration for a benefits package, such as opportunities for training and upskilling, inclusion and personal flexibility in when and where they work. Employees’ interest in upskilling programmes has increased recently as a result of the extremely rapid transformations generated by new technologies with a major impact, including on the workforce. Thus, many employees are aware that they must improve their digital skills to remain competitive in the labour market,” said Ionuț Sas, Partner, People & Organisation Leader, PwC România.

    An employer’s reputation and recruiting experience are also very important for candidates when accepting a job.

    According to the survey, 92% of candidates say they’ve experienced poor recruiting practices at some point in their career, with over 60% being unsatisfied that a recruiting process takes longer than a month or because the recruiters suddenly stopped communicating without any explanation. Nearly half (49%) of job seekers working in in-demand fields like technology, banks or energy say they’ve turned down an offer because of a bad experience during the hiring process, with 56% saying they’d discourage others from applying due to negative recruiting experiences.

    The main conclusion of the PwC US survey ”The future of recruiting”

    • Slightly over half (51%) would forgo higher salaries for more flexibility.
    • 37% of candidates said they’d be willing to take a pay cut for a chance to develop new skills.
    • The same percentage said they see upskilling opportunities as the most important factor in deciding on a new job, after salary and benefits.
    • 62% of job seekers said they’re more likely to apply for a job where a company is openly committed to improving diversity and inclusion in their workforce.
    • Candidates want positive, direct human interaction throughout the recruiting process and less use of automation technology.
    • However, 44% of candidates said they’re open to using automation and technology options for routine contact, and to get information during the recruiting process, and 65% of candidates said they would like organisations to have an application dashboard so they can see where they are in the process. 
    • 78% said they expect the recruiting process to be clear on how personal data is used.
  • Global digital ad spending could exceed $510 billion by 2023

    Global digital ad spending could exceed $510 billion by 2023

    The global online advertising market size was at $240 billion as of the end of 2018 and the final numbers for 2019 will undoubtedly be significantly higher. According to a report from Industry ARC, the market is set to grow at an impressive CAGR of 40% through 2025.

    A additional report from Statista goes even further saying that the worldwide digital advertising market expenditures estimated the spending would further grow to $517 billion by the end of 2023. 

    The ARC report said that the online advertising market, which includes online marketing, Internet advertising, or web advertising, uses Internet and web pages to reach the target customer, and with the recent upsurge in the number of Internet users across the globe, people watching television has significantly reduced, and so, the online advertising market revenue has surpassed the one through broadcast television.

    Online advertising finds applications in social media, E-Commerce, displays, and other media. Now, mobile contains each of the mentioned segments in one single unit, and hence, the target customers prefer to use mobile instead of other sources to access the Internet.

    Henceforth, the online advertising market will observe the application CAGR in mobile to be an outstanding 50-55%. Active companies in the markets this week include Versus Systems Inc. (CSE: VS) (OTCQB: VRSSF), Oracle Corporation (NYSE: ORCL), Domo, Inc. (NASDAQ: DOMO), Cloudera, Inc. (NYSE: CLDR), SeaChange International, Inc. (NASDAQ: SEAC).

    The ARC report continued: “According to the Pew Research Center, 53% of the prospective customers across the globe use social media platforms such as Facebook, Instagram, Twitter, and others. Furthermore, the number of people on social media is only going to increase in the coming years.”  

  • Romanian companies are planning to increase headcount in 2020

    Romanian companies are planning to increase headcount in 2020

    Over half of the respondents in Romania (54%) plan to increase employee numbers by an average of 11% in 2020, according to PwC Romania’s HR Barometer.

    The IT&C sector has the highest demand for new employees, followed by industry, automotive and retail. According to the respondents, 91% of IT&C companies plan to increase the number of employees by an average of 20% next year. In industry and automotive, 71% want to hire 6.2% more people and 50% of retail companies need an additional 6.4%. Personnel increases were also mentioned by 40% of financial services companies and 30% of pharmaceutical companies.

    “Our estimates show that Romania needs another one million employees in the next five years to achieve an average economic growth of 3.5% annually. As we know, in recent years, the workforce has become more difficult to find, which risks limiting the potential for economic development. For this reason, the government and companies should be involved in education programmes to develop the employee skills, especially digital ones, increasingly demanded by employers as new technologies become widely adopted,” says Ionuț Simion, Country Managing Partner PwC Romania.

    According to the survey, almost all of the new positions created in 2019 were in the Digital & Social Media area, such as Chief IT Digital Solutions, Instructional Designer, Social Media Specialist, Digital & Multichannel Manager, Digital Manager, RPA Specialist and Online Manager. The survey respondents also indicated their belief that accounting, IT support, administrative, financial and business analysis departments would be most affected by automation.

    “The main challenges faced by human resources departments in 2020 will be staff fluctuations and low commitment, rising wage costs, the impact of digitalisation and workforce shortage. New technologies and automation mean new skills and positions, which is increasingly being reflected in Romanian employers’ organisational charts. For example, most of the new positions created in 2019 are in the Digital and Social Media area,” says Oana Munteanu, Senior Manager – People & Organisation, PwC Romania.

    Almost all of the HR Barometer respondents consider themselves prepared for the workforce shortages and wage cost challenges in attracting and increasing employee numbers in 2020.

    PwC Romania conducted the HR Barometer study on 65 companies in various sectors during October 2019.

  • Romanians spend EUR 8.7 a month for culture and recreation

    Romanians spend EUR 8.7 a month for culture and recreation

    Czech consumers spend the most on cultural and recreational activities – EUR 38.2 per month – while Romania ranks 8th out of the 13 countries, with average monthly expenses of EUR 8.7, according to the latest report from the real estate consultancy company Colliers International.

    The analysis of 13 countries shows that the leisure segment in shopping centers is dominated by multiplex cinemas (over 452) and fitness clubs.

    “In Romania, the average purchasing power has doubled in the last decade and has led to a significant growth in consumption, increasingly focused on entertainment. As a result, some of the newest shopping centers offer more than 20% of the gross leasable area for food court and entertainment areas, more than double compared to 10 years ago, and the trend is to keep growing, closing in on 30%. In large or mixed-use projects, this percentage may increase”, Venera Munjev, Senior Associate Retail Agency at Colliers International Romania, said.

    Out of the 13 CEE countries, Czech consumers spend the most on cultural and recreational activities – EUR 38.2 per month. The Czech Republic is followed by Latvia (EUR 35.6), Slovakia (EUR 22.5) and Poland (EUR 17.9). Romania ranks 8th out of the 13 countries, with average monthly expenses of EUR 8.7.

    “There are two explanations for this relatively small average of spending on recreation and culture: 1) Romania has the second lowest urbanization rate in the European Union (54% of Romanians live in the city versus circa 80% in Western Europe) and 2) the average includes some of the most developed cities in this area of Europe – Bucharest, Cluj-Napoca – alongside some of the poorest in the EU. In other words, the difference between Bucharest and Warsaw or Budapest is significantly smaller than these figures suggest”, Silviu Pop, Head of Research at Colliers International Romania, added.

    Cinemas and fitness clubs dominate the entertainment market in shopping centers in the CEE region

    According to the Colliers report, there are over 452 cinemas and multiplexes in shopping centers in the 13 CEE countries. Poland and Romania lead the ranks, with 125 and 93 of such spaces, respectively. Based on population figures, in Poland there is a modern cinema for almost 370,000 inhabitants, while in Romania, the ratio is for 210,000 inhabitants.

    Also, calculations based on the average gross salary show that, to buy a ticket to the cinema, Romanians have to work around 48 minutes. This duration is among the smallest, compared to the other 12 countries: for example, for the same purpose, the Polish work one hour and three minutes, the Czechs, one hour and five minutes, while the Albanians work the most – one hour and 48 minutes.

    Romania ranks second in terms of fitness clubs (42), after Poland (115), and third in number of playgrounds for children in shopping centers (60), after Poland (128) and Ukraine (71).

    “In Romania, the indoor entertainment schemes remain the most targeted and most profitable ones, while outdoor leisure schemes can only be implemented in exceptional cases. The main explanation is the temperate continental climate which exposes an outdoor project to an extremely high risk,offering a maximum of 4 to 6 months per year for effective operation. Moreover, the purchasing power in Romania has not yet reached a level that can support large projects, the incidence of accessing theme parks being reduced locally, at a frequency of two or three times a year. The lack of sustained tourism is the third reason why entertainment centers operators need the partnership of shopping centers: cities such as Bucharest, Cluj, Iasi, Brasov or Constanta are partly targeted by young people who visit only during weekends, festivals or summer / winter season for specific activities”, Venera Munjev concluded.

  • PwC Paying Taxes 2020: Romania 32nd in global rankings

    PwC Paying Taxes 2020: Romania 32nd in global rankings

    Romania has climbed to 32nd in the PwC Paying Taxes 2020 global rankings. Romania was 49th in last year’s study, which is part of the World Bank’s annual Doing Business report.

    This year, Romania is ahead of other countries in Central and Eastern Europe, including the Czech Republic (53rd), Slovakia (55th), Hungary (56th), Poland (76th) and Bulgaria (97th). The region’s best performers were again the Baltic States of Estonia (12th), Latvia (16th) and Lithuania (18th).

    Romania’s improved position is due to an average company’s total tax and contribution rate reducing from 40% to 20%. According to the methodology used in the report, the total tax and contribution rate considers only the tax obligations of an average company / employer as a percentage of profit.

    “Romania’s leap up the global ranking resulted from a significant improvement in the total tax and contribution rate indicator. Transferring responsibility for social security contributions from employers to employees has artificially diminished the employer burden. Romania is the only country in the European Union that has shifted almost entirely social security contributions responsibility to employees, but, as we know, the employers ultimately pay. In practice, companies’ fiscal obligations remained similar”, said Daniel Anghel, Partner, Tax and Legal Services Leader of PwC Romania. 

    Romania’s other indicators are unchanged from last year. The total tax time remained at 163 hours a year, compared to 213 hours at the regional level. An average Romanian company makes 14 payments annually, similar to last year’s situation, compared to the regional average of 14.4 payments.

    “Many countries have used technology to make it substantially easier to pay taxes. Whether it is reporting and payment methods that make taxpayers’ lives easier, or improved monitoring and control making anti-fraud measures, digitising tax administrations contributes to better tax compliance and, implicitly, to improved tax collection. From that perspective we see that Romania hasn’t made any progress since last year. The authorities’ recent announcement regarding the SAF-T acquisition tender is a very important step towards digitising the tax administration”, explains Daniel Anghel.

    The global report highlights the significant advantages offered by tax administrations adopting new technologies. In both Brazil and Vietnam, the time needed to meet tax obligations was 23% lower in 2018 than in 2017. Other economies have benefitted from large reductions in the number of tax payments.

    At the regional level, Poland has fallen eight places since last year’s study, due to an increased number of tax reports. The Czech Republic has also slipped eight places, with Slovakia and Bulgaria dropping seven and five places, respectively. The news is better for Hungary, after climbing 30 places to 56th.

    Globally, the ease with which an average company can pay taxes has remained relatively stable across all four indicators: total time (234 hours), total payments (23.1), total tax and contributions rate (40.5%), and post-filing index (60.9 out of 100).

    About Paying Taxes 2020 study

    Paying Taxes 2020 compares business taxation in 190 economies. It helps governments and businesses to assess whether their tax systems are keeping pace with global change and learn from what others are doing. The report models business taxation in each economy using a medium-sized domestic company as a case study.

    The Paying Taxes study provides governments with an objective basis for like-for-like benchmarking of their tax systems and a platform for constructive discussions around tax reform across a broad range of issues.

  • Romanian dairy and cheese manufacturing sector – negative revenue evolution

    Romanian dairy and cheese manufacturing sector – negative revenue evolution

    A new study by Coface Romania on the sector of `Dairy products and cheese manufacturing” indicates a negative evolution of revenues in 2018, which decreased with approximately 18% compared to 2017, with a slightly increased profitability.

    The study aggregated the data of 448 companies that submitted their financial situation for 2018 and generated a consolidated turnover of RON 3.8 billion.

    The weight of the cumulative market share held by the most important 10 players is 58%, which indicates a high degree of concentration.

    The companies operating in this sector registered a current liquidity of 0.97 during 2018, the working capital being exposed to negative shocks and volatility (lower revenues or non-collection of receivables).

    The average duration of debt collection in the analyzed sector decreased from 68 days, the level registered in 2014, to 51 days in 2018, while the national average over the same period decreased from 104 days to 90 days.

    The consolidated net result at sectorial level for 2018 was 4.3%, higher compared to the level of 2017 (3.3%). However, 44% of the companies had a net loss at the end of 2018, 26% of the companies registered losses of more than -20% and 5% of the companies generated more than 20% profit. The 55% level of indebtedness in the sector is decreasing compared to the previous years (62% in 2017, 63% in 2016, 67% in 2015 and 69% in 2014). It is worth mentioning that 39% of companies have a negative capitalization degree (equivalent to a debt level of over 100%), and for 17% of the companies the debt level exceeds 80%.

    “During 2018, the companies in the analyzed sector have allocated significant investments for the expansion of fixed assets. The ratio between capital expenditures (CAPEX) and depreciation ratio was 120% in 2018, which means that investments in fixed assets covered the depreciated fixed assets. Almost half of the companies (46%) made investments in 2018, with a supraunitary Capex/ Amortization report”, stated Nicoleta Marin, Senior Financial Analyst, Coface Romania.

    Regarding the payment behavior, respectively, the debts to the State Budget, according to the data published by ANAF, once with the decrease of the number of companies that have registered the debts, the value of the debts has not decreased, reaching the maximum of the period in 2018.

    According to Eurostat, in the European Union the first three countries for milk production and processing are Germany, France and the United Kingdom. Poland ranks 5th in terms of quantity produced and 6th in processing (10 times larger than Romania, although it only produces 3 times more milk).