Between what he describes as the "madness surrounding the coronavirus," Romania's pending elections, and the current stage of the economic cycle, Stefan Damian, Deputy Managing Partner at Tuca Zbarcea & Asociatii is rather pessimistic about the upcoming months.
“Officially, we have confirmed about 70 [number reported on March 13, 2020] cases of COVID-19 in the country, and right now a state of panic seems to be gradually spreading all over” Damian sighs. He notes that a lot of Romanians are working abroad — about half in Italy, the European country most heavily-affected by the virus. “I think it’s only a matter of time until we have a spike of cases in Romania," he says, "but for the time being, this is not something worrying in itself.” What is worrying for him, he says, is “the effect this crisis will have on the economy,” as Romania is closely connected with other European markets and pins its economy heavily on exports, especially in the automotive sector — which, he believes, will suffer the most after tourism and hospitality.
And this “madness” is coming around at a particularly unfortunate time, Damian says. "We saw more and more interest from PE funds in 2018-2019, but that’s likely to slow down,” he says, and although he concedes the country won't be the only one suffering, he claims that, “there are also specifics in Romania that won’t help, such as having three government changes in recent months and a projected push for snap elections or a saga about electing a new Government, [which] will definitely put funds off even more.”
All of this, he says, comes against a background of an “economy that is not great anyway,” adding that "we are registering pretty high inflation and a high deficit (last year’s was 4% of the GDP and all projections point to a similar, if not higher, number for this year). At the same time, a lot of the economic growth in the country has somehow been driven by consumption — especially as salaries and pensions have gone up recently -— but that will likely stop this year and that will eat away at some of the GDP growth.”
And, Damian reports, with elections around the corner (a round of legislative elections is scheduled for the end of 2020 and another one for local municipalities in the middle of the year), “people seem more interested in playing nice to secure votes than addressing systematic ills in the economy.” As a result, he admits, he is pessimistic about the economy's outlook, especially as “Romania has traditionally not been the best in terms of absorbing EU funds and putting them to good use towards much-needed huge infrastructure projects that would benefit the economy in more ways than one."
Asked about new legislation generating business for lawyers in Romania, Damian points to the DAC6 Directive on cross-border tax arrangements and the implementation of the anti-money laundering regulation Directive 2015/849, which add several obligations to exchange information with authorities, and which, he says, “are defined rather broadly and vaguely, which lawyers will find tricky to navigate, especially when, arguably, some of these obligations might directly contradict the principles guiding the legal profession.”
Damian reports little real recent movement of note on the Romanian legal market, and he reports that the biggest news recently was the redefinition of Allen & Overy's relationship with RTPR (reported on by CEE Legal Matters on March 2, 2020), though he says that it will "likely not change too much in the market since the local team will likely remain their go-to partners on the ground.”
Lastly, in reference to pending/potential deals of significance, Damian reports that the one blockbuster deal in the works is CEZ being put up for sale — a deal that, “if it goes through, will likely be the largest deal in the market this year.”