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June 18, 2021

Nokia plant lockout will reduce Romania’s GDP by 0.2 pc

With an International Monetary Found (IMF) stand-by agreement disciplining governmental policies and two consecutive quarterly hikes in GDP this year, Romania seems, at least on paper, to be recession-free and less risky, according to the sixth edition of the Deloitte Business Sentiment Index report released yesterday.

Romania’s economic growth has been closely linked to Foreign Direct Investment. Last month’s decision of Finnish-based Nokia to close down its Romanian plant is the most recent evidence that Romania is steadily losing its low-cost advantage in favour of less developed countries in South America, Africa or Asia. The move, annulling one of the most important foreign investments in Romania over the past several years (Nokia was the second largest exporter in Romania in 2010), was warning enough for the country’s government. New construction projects, infrastructure works and agriculture development, supported by the accelerated absorption of EU structural funds, are the immediate solutions to balance the loss of Nokia, which could translate into an estimated 0.1 – 0.2 pc drop in GDP.

Locally, the Romanian business environment still has some cards to play provided it invests in innovation and differentiation.

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