With a new government firmly in place, Romania is finding new economic stability, although there are issues surrounding the ever-increasing prices of energy, according to Popovici Nitu Stoica & Asociatii Deputy Managing Partner Bogdan Stoica.
“The main political topic in Romania right now is the ongoing war in Ukraine,” Stoica begins. “The focus of the whole society in the country is on helping the refugees – this outweighs all other topics.”
Aside from that, Stoica says that the hottest topic of late has been the soaring energy prices. “Even with Romania being largely energy-independent, speaking in terms of gas and electricity, we have been relying on imports as well. However, that has been more because of the competitive nature of the market, rather than real resource needs – we shouldn’t be impacted in any dramatic way by what’s going on,” Stoica says.
Following what Stoica describes as a “very turbulent autumn in 2021,” Romania has a new coalition government in place, composed of socialists and liberals. “It appeared to be very unstable at first but, fortunately, the coalition government found a way to work coherently and navigate all major problems,” he says.
The stability of the Romanian government is reflected in the stability of the market. “We do not feel, for the time being, any heavy influence of the ongoing war in Ukraine – the businesses in Romania are operating at a normal pace and there are no signs of this changing soon,” Stoica reports. “The government has, indeed, done a better job than most thought it would and this reflects on the markets, too.”
And this was well-timed – Stoica reports that 2021 has been a record year for M&A transactions in Romania. “We have not seen such a level of transactions in the past 20 years, I believe – a tremendous year, business-wise,” Stoica says. “This was the case, in particular, in the real estate sector but not only.”
Finally, speaking of the legislative updates, Stoica mentions the highly-expected energy package. “The past six months have been difficult for a number of industry sectors, due to rising energy prices,” he says. “All gas and electricity-heavy operations – for example, steel manufacturing – faced increases of up to 100% in price.” Stoica reports that the government came up with an aid and compensation package but there are still problems. “The current compensation scheme the government is promoting still leaves something to be desired, in terms of implementation – this will not be an easy task.”
The compensation scheme is being debated on all sides of the market, Stoica notes. “The current compensation scheme will expire at the end of March 2022, meaning that the new one – after it gets properly vetted – is likely to take hold as of April of 2022, to last until the end of next March,” he says. “In spite of the scheme, which is likely to introduce price caps for gas and electricity, the current energy price trends are expected to lead to additional inflation for the market.”
Ultimately, Stoica underlines that, regardless of how it all plays out, the energy sector will be where the most interesting developments occur in 2022. “A lot of investor interest exists for green energy projects. I expect 2022 to have a lot of energy investments and that the government will continue with the development of a number of large infrastructure projects which had been left aside for the past 15 years,” Stoica concludes.
