Domestic industry is already contracting amid less than favorable indicators coming from Romania’s major trading partners (Germany especially) and one of the staples of Romania’s industry – its auto sector, is likely to feel the pinch of global trends, with the auto manufacturing sector seeing its first decline in a decade.
Private consumption remains quite decent in Romania amid (still) double-digit wage growth in year-on-year terms, meaning that the need for industrial and logistics spaces assigned to the expanding retail sector throughout Romania should remain a driver in 2020; so will the expansion of e-commerce, which is growing quite fast alongside traditional brick-and-mortar operations.
Romania’s goods exports to the UK are nearly two thirds bigger in terms of absolute value than the service exports, but the latter likely have more value embedded as British demand generates around 12% of external demand for domestic IT services, for instance.
Strictly on the goods side, the UK is a major destination for various manufacturing sectors (including automobile industry), the textile sector and agriculture. Around 9% of the Romania’s car exports head to the UK, with a hefty export demand also coming from various car parts; in the women’s apparel segment, the UK attracts over one quarter of the exports.
A negative Brexit scenario could lead to a significant short-term impact, but it would also lead to longer-lasting effects as global value chains have become closer integrated and Romania’s biggest export partners do a considerable amount of business with the UK. Over a longer term, it is quite difficult to say how things will settle, though Romania’s relatively low wages, healthy productivity gap to labor costs and good connectivity to Western European markets would offer some advantages.
The industrial and logistics stock will grow considerably in the next three years (by 2023), if infrastructure projects really start to become visible and fiscal policies will not experience major changes designed to discourage investments in this segment. (source: Colliers)
